You knew, of course, that the issue of economic stimulus packages would all come down to politics.
Despite the fact that many economists feel that the tax rebates won’t significantly improve the economy (and the market agrees), Congress and the President are still pushing the plan forward. It’s not yet a done deal, however, because Democrats and Republicans disagree on who should actually get rebates.
Bush has said he wants rebates for those who currently pay income taxes. In tax-speak, that means he’s likely hoping to eliminate the 10% tax bracket. The result is rebates of up to $800 for single taxpayers and up to $1,600 for married taxpayers.
However, the Dems want every worker who pays Social Security taxes, whether or not they pay federal income taxes, to get a rebate. Social Security taxes affect all employees, no matter what his or her income bracket is (though arguably, higher earning employees pay less in terms of percentage since no Social Security tax is paid once income reaches $102,000 for 2008).
The Dems argue that getting money into the hands of more taxpayers makes the most economic sense because studies suggest that folks are more likely to spend the money. One study from 2001 found that consumers spent 2/3 of their rebates within six months. That, proponents claim, could make an appreciable difference.
I wonder about that last bit.
If you received a rebate today, what would you do with it: spend or save? And if you spend it, what will you spend it on: consumer goods, paying off debt or something else?
I would spend it on consumer goods. Alas, the goods would most likely be illegal street drugs that the government would have a difficult time monitoring.
We’d pay down debt with a rebate. $1600 would put us awfully close to owning our van.
I know this is a stupid question, but is the rebate a true grant from the government? Or is it just an advance against next years’ taxes? If it’s an advance, won’t most people be stuck with a big tax bill next year?
This is a good question, Skippy, and one that wasn’t really answered until recently (there were multiple versions of the plan). The 2001 checks were an advance, but this will not be if the plan as stands makes it through Congress. More here:
http://www.taxgirl.com/what-exactly-is-a-tax-rebate-and-more-importantly-what-does-it-mean-for-me/
i am on disablity social security will i get a rebate