The president also issued a strict new vaccine requirement for US federal workers, the nation’s largest workforce with some two million people.
The order requires employees to show proof of vaccination or be subjected to mandatory testing and masking.
Just under half of the US is fully vaccinated, according to official data.
Speaking from the White House on Thursday, Mr Biden said that the new measures are a result of the highly contagious Delta variant’s spread, made worse by a “pandemic of the unvaccinated”.
“People are dying and will die who don’t have to die,” the president said.
Mr Biden added that the monetary incentive may seem unfair to already vaccinated Americans, but “we all benefit if we can get more people vaccinated”.
States would use money from the $1.9tn American Rescue Plan legislation to fund the incentives.
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