Let The Tax Rebate Debate Begin!

[dvcgirl]

Here's where the battle will be....whether Americans who paid no *Federal Income Tax* last year will get this tax rebate. According the the NY Times article below, nearly 40% of all Americans pay no federal income tax at all.

Low income Americans pay for Social Security and Medicare, but many pay no income tax. The Republicans are calling this a tax *rebate*, and are saying that in order to receive a rebate, one must actually pay income taxes. The Democrats aren't likely to stand for this, especially in an election year.

However, if checks go out to everyone, it will be much more expensive than they're projecting. I was wondering how they were thinking that they could do this for 140 Billion, that's how....40% of workers wouldn't be receiving a rebate.

I have to tell you, I'm all for fiscal responsibility and taking care of yourself, but it would seem to me that the bottom 40% are the ones who need this money the most, and the ones who will *definitely* spend it. Send me $1,600 bucks and it's going one place....right in the bank. I don't need it.

For all of those DISers making plans with that money, well, I wouldn't spend it just yet .

Here's the article for those interested....

http://www.nytimes.com/2008/01/20/w...gin&adxnnlx=1200856036-YOh+pL/Wr3+EI6I3ei6OOw

 

[Schachteles]

Personally as I read more and more, I just get more and more confused, one time it gives this in come level and the next another. I won't believe anything till I have a check in hand. And I surely won't spend it till I fully understand how that is going to effect my taxes for 2008.

 

[Cheshire Figment]

As a CPA, I have always told my clients this:

Until you read that both houses of Congress have passed, and the President has signed, a tax bill don't believe anything you read in general circulation publications, hear on television or read on the Internet.

Until it is a law, it is conjecture. If you have strong opinions, you might look at some of the professional information and then contact your Congresscritter with comments prior to legislation.

 

[bdcp]

It's not a rebate if you didn't pay into the system to begin with. It's called an entitlement.

The plan is not about need. It's about stimulating the economy. I think a lot of people will spend it on something, whether it's bills or buying something they've been saving for.

 

[npmommie]

I don't plan to spend it , it is going right into our savings account, because it WILL affect our taxes for next year. they did this in the past, a few years ago and I forget how it affected the taxes, i would have to pull out the paperwork but I remember that is did affect how much we got back.

 

[dvcgirl]

It's not a rebate if you didn't pay into the system to begin with. It's called an entitlement.

The plan is not about need. It's about stimulating the economy. I think a lot of people will spend it on something, whether it's bills or buying something they've been saving for.

Well, if it's truly about getting that money into the economy, then wouldn't you give it to people who need it? They'll spend it.

I'm not saying that most Americans who pay taxes couldn't use some extra money as well, but you're more likely to find some people like me in that bunch. We hardly ever have any checks to deposit so we never go to the bank. DH will throw the check in a drawer somewhere, forget about it for awhile, finally get around to depositing it into checking a couple of months later....and then he'll funnel it into savings a few months later.

I think that the whole plan is ridiculously stupid, but I thought some DISers might like to see that NY Times article and what Congress will be debating.

 

[micki7337]

As I see it, they have to direct the rebate to individuals who pay taxes so that it can be reconciled against their 2008 taxes. By issuing checks to those in a tax bracket they will be able to 'collect' it back next year as well as pump money into the American market. That in turn will hopefully create a need for goods/services that the lower non-tax paying individuals will benefit with opportunities to earn and in turn have money to put back into the market.

They also recognize that there is a population out here that while we are effected by what's going on in the economy, we're still okay and will be able to weather the storm. So for those above the thresehold (I'm hearing 85/110), there's limited need. Hopefully those above 85/110 benefit with just a stimulated market without benefit of the rebate. But those in the 'target' zone are more likely to be hurting now and they can be used to get the ball rolling! So spend away - on American services and products.

If they directed payment to those who have no tax liability because they don't have enough in earnings, then it's a give away - with no ability to recover the money this is going to cost. Everything I read has receivers reconciling the rebate (i.e., advanced payment) against their 2008 return just like we did in 2002 with the child tax credit. When you file next year the IRS will substract the total amount you receive this spring/summer.

We'll be happy to sit back and watch others get their checks and hopefully we will reap the benefits.

 

[wulfgeat]

I find this topic really tough. First, is it the govt's job to do this? I guess that is a moot point since the gov't already tinkers with the economy. We will probably put any refund on our mortgage in hopes of paying it off within the next 4 years.

The reality is that the tough economic times are tougher of those that have less. Rising gas prices cost me a smaller percentage of my income than someone that makes half as much. It would be cool for me, but I don't need it. I think it makes more sense to tie it to those paying SSI taxes and cap at somewhere around the top 10%. Granted, I don't know what those numbers actually do, but early gut reaction is that.

 

[bdcp]

I find this topic really tough. First, is it the govt's job to do this? I guess that is a moot point since the gov't already tinkers with the economy. We will probably put any refund on our mortgage in hopes of paying it off within the next 4 years.

The reality is that the tough economic times are tougher of those that have less. Rising gas prices cost me a smaller percentage of my income than someone that makes half as much. It would be cool for me, but I don't need it. I think it makes more sense to tie it to those paying SSI taxes and cap at somewhere around the top 10%. Granted, I don't know what those numbers actually do, but early gut reaction is that.

I think everyone would be really surprised who the top 10% of earners are. They're your neighbors, your co-workers, etc. They're also the ones paying the majority of taxes. I know we fall into the top 10% but we also live in a high cost of living area, something people forget and look at just numbers.

Plus, last time I checked we do not live in a socialist country. I do not like the idea of redistribution of wealth through taking from one group to give to another. That will actually hurt the economy and not help anyone.

 

[dvcgirl]

From the research I've done on the 2001 rebate, which was for $300, like others are saying here.....it wasn't a *rebate*, it was an *advance* on taxes you'll be paying next year.

Here's one explanation I read that made sense to me...

"What tax rebate?

Once again Bush is snookering us in an enormous game of Economic National Monopoly.

It is NOT a rebate; It IS an advance on the 2008 taxes you'll be paying in 2009.

It's the same sham of a scam perpetrated on the public in 2001, because it sure sounds a lot like the "Tax Rebate Lie of 2001," the sequel.

Of course, they would never call it what it is: An advance on 2008 tax refunds, just like it was in '01.

Just as in 2001, many tax payers were delighted to get that feel-good check for $300, if they got that much. Mine was $37.11.

It didn't feel so good when they went to do their 2001 taxes in 2002, and found that the $300 was nothing more than a loan, and hardly any of them read the fine print."


So, it sounds like it would be best to just put this money in the bank, or you'll have to pay it back next year anyway. This is why they don't want to send checks to the 40% of Americans who don't pay income tax. They have no way of collecting it.

So, say you're a family who normally gets about $1,600 back from the IRS each year. If I'm reading this correctly, you'll get your rebate check this summer for $1,600 and then in 2009 when you file, you'd break even and get nothing back. If you're a family who normally *owes* $1,000 a year, in 2009 you'll *owe* $2,600 instead.

I don't remember getting anything in 2001 or really paying much attention to this rebate thing, but if what I'm reading is true, it's really hoodwinking people into thinking that they're getting something when in fact they're just getting an *advance* on their own money. I would think that a lot of people will be royally POed in 2009.

 

[CajunDixie]

My DS17 was put on payroll in December thus paying taxes so would he possibly be getting one to the "economy boosting" checks? Or is that something we have to wait & see how/if they set this up? Or is he more likely to get $66 since he's only paid taxes for 1 month?

 

[DianeV]

Alot of you just arent reading this correctly and we did go over this about the 2001 one in another thread...it was not taken 'out' of anything you got the next year. It was an additional amount given that you were able to get early is all.

 

[mamalle]

so like before- it will be for the following year just in advance. so it will be deducted for your 2008 taxes- so you might get less next year or even owe..

 

[dvcgirl]

Here's a great Q &A explanation from USA Today on the 2001 rebate.....and here's the important part (entire article below).

"Q: How much will I get?

A: The check represents an advance refund on your 2001 taxes. The tax cut reduced the rate to 10% from 15% on the first $6,000 of taxable income for singles, $12,000 for married couples who file jointly, and $10,000 for heads of households. The rates are retroactive to Jan. 1. That translates into a $300 refund for singles, $600 for married couples who file jointly and $500 for heads of households."

Important part: "The check represents an advance refund on your 2001 taxes."

They'll base the refund on the previous year's tax return. Back then they used 2000's return since the deal went through after tax season was completed. Now they may have to use 2006.





http://www.usatoday.com/money/perfi/columnist/block/2001-06-12-block.htm

 

[dvcgirl]

lol....okay, I just read this for the zillionth time, and I think DianeV is correct....the reason you didn't get screwed the last time was because of the retroactive tax cut.

So it *was* $300 free and clear last time, since the tax cut was retroactive.

So....and I think I finally get this....lol......if there is no retroactive tax cut in this plan, *this* time, you may indeed have to account for this money on your taxes.

Am I getting this? I think I'm over-thinking it....it must be easier than this to figure out.

So, it's not the same deal as 2001 unless there's a retroactive tax cut in place. This time it would just be a loan. I can't imagine the Dems passing anything with a retroactive tax cut in it.

 

[Tiffany]

I don't plan to spend it , it is going right into our savings account, because it WILL affect our taxes for next year. they did this in the past, a few years ago and I forget how it affected the taxes, i would have to pull out the paperwork but I remember that is did affect how much we got back.

You are correct becuase it was basically an advance on your tax refund based on prior year filings. So if your tax status changed you could have ended up owing taxes.

 

[Tiffany]

Here's where the battle will be....whether Americans who paid no *Federal Income Tax* last year will get this tax rebate. According the the NY Times article below, nearly 40% of all Americans pay no federal income tax at all.

Low income Americans pay for Social Security and Medicare, but many pay no income tax. The Republicans are calling this a tax *rebate*, and are saying that in order to receive a rebate, one must actually pay income taxes. The Democrats aren't likely to stand for this, especially in an election year.

However, if checks go out to everyone, it will be much more expensive than they're projecting. I was wondering how they were thinking that they could do this for 140 Billion, that's how....40% of workers wouldn't be receiving a rebate.

I have to tell you, I'm all for fiscal responsibility and taking care of yourself, but it would seem to me that the bottom 40% are the ones who need this money the most, and the ones who will *definitely* spend it. Send me $1,600 bucks and it's going one place....right in the bank. I don't need it.

For all of those DISers making plans with that money, well, I wouldn't spend it just yet .

Here's the article for those interested....

http://www.nytimes.com/2008/01/20/w...gin&adxnnlx=1200856036-YOh+pL/Wr3+EI6I3ei6OOw

If this ends up being similiar to what they did a few years back all it amounted to was an advance on your tax refund so how can people who do not end up paying any income taxes get an advance on a tax refund? The tax refund that people get is because they have overpaid their taxes for the tax year in question. Just because you get a refund does not mean you did not pay any income taxes in a given year it means you over paid. So you cannot get an advance on your tax refund if you normally do get one.

 

[madge]

So, it's not the same deal as 2001 unless there's a retroactive tax cut in place. This time it would just be a loan. I can't imagine the Dems passing anything with a retroactive tax cut in it.

I'll be kinda sorta irritated if it's a loan. Especially since I didn't ask for it.

On the upside, as I said in the other thread ... if it is an advance on my tax return, I'll put it in the bank to earn interest until I get the rest of the refund. LOL.

It would have been nice if the President/Congress/Government or the media would have waited until the specifics were in place before announcing it to the general public.

 

[EthansMom]

The reality is that the tough economic times are tougher of those that have less. Rising gas prices cost me a smaller percentage of my income than someone that makes half as much. It would be cool for me, but I don't need it. I think it makes more sense to tie it to those paying SSI taxes and cap at somewhere around the top 10%. Granted, I don't know what those numbers actually do, but early gut reaction is that.

We're someplace in the lower portion of that top 10%. We didn't qualify for the last rebate and probably won't qualify for this coming one. I can't remember what it was, but there was an income cap for the 2001 rebate... maybe $100,000? But why would I need an interest-free loan from the federal government?

These rebates are all "smoke and mirrors" to encourage people to spend money that most of them shouldn't be spending. If you usually get a refund, this rebate would just reduce your next refund. You could do the same kind of thing by changing your exemptions on your W2. If you don't usually get a refund, then you're going to owe the gov't your usual amount PLUS all of this rebate amount when you file your next taxes.

Let's say you usually owe the gov't $1000 at tax time. They give you a rebate of $1600, which makes you decide to buy a $2500 big-screen t.v. If you hadn't gotten the rebate, you wouldn't have bought the big-screen t.v. and would actually have $2500 more in your pocket. Oh, and instead of having to come up with $1000 to pay your taxes, you now need to come up with $2600!

The rebate is a slick approach that the gov't uses to make their economic numbers temporarily improve. Their hope is that if they give you a $1600 rebate, you WILL go out and buy that $2500 big screen t.v. Because then the store where you bought the t.v. will have higher sales and will not have to lay off the salesman from whom you bought the t.v. In turn, he will be able to use his paycheck to purchase his necessities and luxuries, which will keep other employers from having to lay off their employees.

Regarding a previous PP's comment about wealth redistribution... our country already uses federal taxes to redistribute wealth. It is possible for low income families to get more money back from their taxes than they paid because of credits and such. In the meantime, credits and deductions phase out for higher incomes. Personally, I'm in favor of a flat tax or a consumption tax... With either system, lower income families would pay less tax and higher income families would pay more, but we would all pay something.

 

[dvcgirl]

I'll be irritated if it's a loan. Especially since I didn't ask for it.

On the upside, as I said in the other thread ... if it is an advance on my tax return, I'll put it in the bank to earn interest until I get the rest of the refund. LOL.

It would have been nice if the President/Congress/Government or the media would have waited until the specifics were in place before announcing it to the general public.

Clearly you shouldn't be taking my word as authority on this, but if what I read about read the 2001 rebate correctly, the reason you didn't have to "pay it back" in effect was because there was a retroactive tax cut involved, and they gave us that money in the current year (2001) instead of making us wait until we filed taxes in 2002.

I think I'll ask an accountant if and when this thing goes through. My DH looked back...we did receive $600 in 2001. So I'm guessing if they do the same thing we'd receive $1600 this time.

I don't know why I care, I have no plans to spend the money anyway, I'm just trying to understand the plan.