Bush, Dems agree to send me money

The White House and Congress have reached a tentative deal on an economic stimulus package:

Pelosi, D-Calif., agreed to drop increases in food stamp and unemployment benefits during a Wednesday meeting in exchange for gaining rebates of at least $300 for almost everyone earning a paycheck, including low-income earners who make too little to pay income taxes.

Families with children would receive an additional $300 per child, subject to an overall cap of perhaps $1,200, according to a senior House aide who outlined the deal on condition of anonymity in advance of formal adoption of the whole package. Rebates would go to people earning below a certain income cap, likely individuals earning $75,000 or less and couples with incomes of $150,000 or less.

People would have to have earned at least $3,000 in 2007 to receive the rebates, the officials said.

I don't know whether this is economically or fiscally sound, but I could certainly use $900. The big ugly red number on my budget spreadsheet thanks you, President Bush and Congresswoman Pelosi. :)

UPDATE: It sounds like some of the information in the original article was incorrect, or I misunderstood it, or some combination of the two. Money quote (literally):

Under the deal, nearly everyone earning a paycheck would receive at least $300 from the Internal Revenue Service. Most workers would receive rebates of $600 each, or $1,200 per couple. Families with children would receive an additional payment of $300 per child [up to a cap of $1,200, i.e., you can get credit for at most four children]. Workers who earned at least $3,000 last year -- but not enough to pay income taxes -- would be eligible for $300.

So, at least in theory, Becky and I should be in line for $1,500, not just $900. Sweet!

But, hmm... I wonder... are the earning floors for married couples calculated jointly or separately? Also, can we somehow make the IRS aware of Loyette's existence, which they normally wouldn't know about until April? :)

The article doesn't specify when the checks are to go out, except to say that it will happen "quickly."

In any event, this isn't a done deal yet:

Congressional aides cautioned that it was too early to say that a deal had been finalized, and the finishing touches will be made over the next day or so as party leaders try to get their rank and file to buy in on a deal. ...

With both sides conceding on issues important to their base, there is potential to upset the delicate bipartisan truce prevailing on Capitol Hill, which is why leaders of both parties want to quickly advance the package before partisan rancor tears down any negotiations. ...

There are indications already that the Senate — the world's most deliberative body — may slow things down when the stimulus package passes the House.

"There are reports that a deal may be close on the House side. The Senate will want to speak, as well," said Sen. Max Baucus (D-Mont.), the chairman of the Senate Finance Committee. "We want to ensure that Congress does its utmost for the American economy and for the American people.”

P.S. The L.A. Times notes that party leaders "have set a deadline of Feb. 15 for passing the legislation."

Comments

[john]

They're bribing you with your own money.

[Marty West]

OK this might be a dumb questions but...

I have a son. His mother and I are no longer together but we have 50/50 custody. She claimed him last year and this year I am claiming him. So would we EACH get $300 or would she get it because she claimed him last year? Does anyone know how this would work?

[Brian Foster]

Marty,

Just a guess based on my recollection from the 2001 rebate, but I believe they look at the most recently available prior year tax returns to determine dependent status qualification, income cutoff, etc.

So assuming this package is in place early enough that 2007 taxes won't have been filed yet, I would speculate that they would base it off of 2006 records. Whoever claimed your son in the 2006 tax year would get the extra $300 for him.

Again, just speculation based on hazy recollection and my own idea of what would make sense.

[4-7]

paycheck earners who don't pay taxes, please remember to quickly write a thank you note to the taxpayers you just stole from. you know how hard it is to write a thank you note once you procrastinate more than a week!

[Brian Foster]

Hmm --- I just noticed the qualification in the article that you must have earned at least 3K in 2007 to qualify under this proposal, so maybe they do intend to have the 2007 tax year be the determining factor.

And of course, they could do 2007 for earnings (since IRS knows what everyone earned during the year due to the regular withholding requirements) while sticking to 2006 for dependent status (because the IRS won't know who has how many dependents in 2007 until returns for 2007 are filed).

IOW, Brendan might only be getting $600, unless the proposal provides for a way to claim a rebate based on a dependent not claimed prior to 2007.

[Brendan Loy]

Brendan might only be getting $600

I'll sue!

"The court will now hear arguments in the case of Loyette v. Internal Revenue Service..."

;)

[Brendan]

P.S. IRS knows what everyone earned during the year due to the regular withholding requirements

Well, they know what everyone earned during the year if federal taxes were withheld from those earnings. But what about people who make lots of money from tips, etc. -- which they, being good citizens, will of course declare on their taxes in April, but which the feds don't know about yet? I imagine there will be folks who will come in just under the $3,000 threshold, when in fact they should be over it, for this reason. So, just as the "proposal [should] provide[] for a way to claim a rebate based on a dependent not claimed prior to 2007," it should also provide for a way to dispute the amount that the feds claim is your 2007 income.

Harumph.

[Julia]

Ok, so I made more than $3,000 in 2007, but less than the amount required to actually pay taxes, but I'm a dependent so I do have to pay taxes. But as a dependent my dad gets the $300 bonus for my existence.

So, do I get $600 or not?

[Brian Foster]

I suppose I need to start adding the disclaimer that this is neither tax nor legal advice. :)

First, to clarify -- according to the story, the extra $300-600 goes to "families with children," not "taxpayers with dependents." From this I would speculate the more appropriate determining factor would be whether one has a child who would qualify a taxpayer to claim the Earned Income Tax Credit or Additional Child Tax Credit. I don't recall the specific factors offhand, but they basically establish that while a "dependent" could be a college student or an elderly relative, a "child" has to be an actual child who lives with you and is in some way your legal responsibility.

So, Julia, if you mean that you're a college student working a part time job but still being claimed as a dependent by your parent(s), then you probably will get your own $300, and your parent(s) will not get $300 for you, because a) you meet the requirement that you get a paycheck and earn at least $3K, and b) you are not a "child" under those other tax credits anymore and therefore may not be one under this plan either. But if you're still living at home and in high school and under 18 and earning a paycheck that pays at least $3K, then I have no idea, since it would seem that you qualify as both a recipient in your own right and a "child" to your parent(s).

Brendan, as to your point about withholding and whatnot, I am more confident, but still speculating, that this is precisely why the original qualifier refers to workers who "earn a paycheck." Similarly, the EITC deals with "earned income." I realize the primary distinction there is between earned and investment income, but I believe for EITC purposes there is a distinction between earned wages and tips. I might be wrong about that -- but I don't think so. So yeah, it sucks for people who get paid less than 3K in their paychecks even as they receive more in tips or other work-related compensation, but if the line was drawn at 2K, the people who only made 1.9K are in the same boat, etc. etc.

I say again, I'm just speculating here and know absolutely nothing about this proposal other than what is written in the linked article. The rest I am drawing from memory of my own tax experience and my study of the tax code in law school. (And some of that memory is better than others, no question.)

[Brian Foster]

P.S.

Julia, given the facts you describe, I don't see any way *you* could get $600 yourself, as you yourself have no child. For you, it's $300 or nothing. For your dad, it's definitely $300 for himself. The question then is whether he gets $300 for you, and if so, whether that means you get $0, or if you still get $300.

Also, I'm not entirely sure what this means:

" less than the amount required to actually pay taxes, but I'm a dependent so I do have to pay taxes"

Either you earn enough to pay taxes, or you don't. The fact that you are a dependent on someone else's return affects that only in the sense that you don't get to claim yourself as a dependent and thereby get the personal exemption for yourself -- that goes to your dad -- but there is still some ability to offset your gross income such that you may, or may not, end up with a low enough AGI that you do not owe tax. But it's not the case, so far as I know, that simply because you are a "dependent," you "have to pay taxes" on an amount that you otherwise would not have to pay.

Do you mean that you still *file* your taxes? Because, assuming that you earn a small enough amount that you have no tax liability (i.e., that you do not have to pay taxes), you would still need to file in order to get a refund of whatever taxes were withheld during the year. But that's not the same as paying taxes. (Indeed, it's precisely the opposite. :) )

(Again, not advice of any kind. Reliance on anything I've written is expressly discouraged. :) )

[Julia]

As a dependent, the threshold of when you start paying taxes is lower. But I guess that doesn't really matter here since I still made more than $3k. But I have had to actually pay income tax nearly every year since I've started working. Only one year did I get a refund, but I still wasn't refunded everything I had paid.

As to the $300 vs $600, I guess I misunderstood. I thought everyone gets $600 unless they have kids, in which case they get an extra $300? But I guess the $600 is only for over a certain amount of earnings.

And, don't worry, I won't rely on anything you say. I'm just curious as to whether I'm getting a piece of the pie. :D

[Gardner]

I was talking w/ my mom last night, who works for H&R Block. She said that in the 2001 package where you received $300 tax rebate check, they IRS took that out of you 2002 tax refund (assuming you get one). For example, Let's say in 2001 I got $3000 refund check, and then a few months later I get $300 rebate check. In my 2002 filing (assuming everything stays equal), I only get $2700 refund check.

She thinks that this is probably going to be the same thing. So be weary of the final package, and be prepared to be out $300 (or more) in your 2009 filing. But by then the voting will be over and they won't care about you.

I'm not sure who this would apply to the people who don't pay taxes. I certainly hope they don't have to pay $300 in 2009.

[Gardner]

This article my explain it better.

http://www.truthorfiction.com/rumors/t/taxadvance.htm

[jlr]

And the national debt looks like this...

$9.2 trillion and counting...

[Brian Foster]

As a dependent, the threshold of when you start paying taxes is lower.

Ok, I think we're saying the same thing, just different ways.

As to the $300 vs $600

Right, my understanding is that every person who "earns" at least $3000 will get $300, regardless of whether they actually have a tax liability or not. And "families with children" will get an additional $300 per child, up to two children. Add that to the $300 that each parent in the family gets, and that brings you up to a max of $1200.

What if only one parent in the household works? One of two things, I'd guess -- either a) it's just $300 for the adults, plus $300 per kid, to a max of $900, or b) there will be a provision that allows a "family," probably defined as two people who filed either as married-joint or married-separate last year, to get $600. Or something.

I really don't know. :)

[Steve]

Suppose that every day, ten men go out for beer and
the bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it
would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed
quite happy with the arrangement, until one day, the
owner threw them a curve. 'Since you are all such
good customers,' he said, 'I'm going to reduce the
cost of your daily beer by $20. 'Drinks for the ten
now cost just $80.

The group still wanted to pay their bill the way we
pay our taxes so the first four men were unaffected.
They would still drink for free. But what about the
other six men - the paying customers? How could they
divide the $20 windfall so that everyone would get his 'fair
share?' They realized that $20 divided by six is
$3.33. But if they subtracted that from everybody's
share, then the fifth man and the sixth man would
each end up being paid to drink his beer.
So, the bar owner suggested that it would be fair to
reduce each man's bill by roughly the same amount, and
he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing
(100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before and the
first four continued to drink for free, but once
outside the restaurant, the men began to compare
their savings. 'I only got a dollar out of the $20,
'declared the sixth man. He pointed to the tenth
man,' but he got $10!' 'Yeah, that's right,'
exclaimed the fifth man. 'I only saved a dollar, too.
It's unfair that he got TEN times more than I!'

'That's true!!' shouted the seventh man. 'Why should
he get $10 back when I got only two? The wealthy get
all the breaks!'

'Wait a minute,' yelled the first four men in unison.
'We didn't get anything at all. The system exploits
the poor!'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for
drinks, so the nine sat down and had beers without
him. But when it came time to pay the bill, they
discovered something important. They didn't have
enough money between all of them for even half of the
bill!

And that, boys and girls, journalists and college
professors, is how our tax system works. The people
who pay the highest taxes get the most benefit from a
tax reduction. Tax them too much, attack them for
being wealthy, and they just may not show up anymore.
In fact, they might start drinking overseas where the
atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia

For those who understand, no explanation is needed.
For those who do not understand, no explanation is
possible!

[Brian Foster]

Gardner,

Your information about 2001 is correct. Something similar was done in whatever year they sent out early credits for the ACTC, but at least in that case there was a line item on the 1040 for that year showing that you already received a portion of the credit in the form of the check that came the previous summer. But in 2001, as your article notes, the fact that the summer rebate was an "advance" on that year's taxes was buried in the tax tables, in order to avoid the unpleasant prospect of people having to "add back" the $300 they had earlier received onto any tax bill due.

If this year's "rebate" is done the same way as 2001, then the people who don't pay taxes get a free $300, because once their tax liability is reduced to zero (whether because of a low AGI, or other tax credits that cancel out their tax liability), that's it.

[Jay Johnson]

This all reminds me of an episode of Futurama.

"Three Hundred Big Ones" I believe is the name of the episode.

Tricky Dick Fun Bills come to mind.

It's ridiculous and absurd. So the government f@#ks things up by spending way more money that it's receiving in taxes, and then decides to "stimulate" the economy by going that much more ass-deep in debt by returning tax revenues to the citizens. Heck, not only are taxpayers getting cash back, but we're doubling up on the debt by giving money back to people who haven't even paid any federal income tax.

The stupidity of social engineering rears its ugly head again.

I'm going to go swim with Mushu.

[Brendan Loy]

Brian, the "tip" thing was just an example; aren't there regular employers -- giving out regular "paychecks," not tips -- who are exempt from tax withholding? Or am I smoking crack? I seem to recall, though I could be wrong, that this was the case with one of Becky's employers this year, as they were a religious organization and were therefore somehow exempt from doing withholding... or something like that. I'd have to look at the W-2s to be sure... but anyway, you can see why I care about this issue. Though I promise not to treat anything you say as actual advice. :)

[Brian Foster]

Okay, I finally broke down and did a little research. :)

The 2001 advance was, as Gardner correctly points out, an advance on the 2001 lowering of the bottom income tax rate from 15% to 10% on the first $6000 of income for a single person, $10,000 of income for a head-of-household, and $12,000 for a married couple (whether filing separately or jointly). So everybody got checks in spring-summer 2001 reflecting that reduction, using 2000 taxes as a guide. If you filed singly in 2000 and made at least $6000, you got the full $300; if you made less, you got 5% of what you made. Same for married -- if you made at least $12,000, you got the full $600. Whether you had kids or not had nothing to do with it. And if you had zero tax liability in 2000, you didn't get a check.

(Also, it turns out that if you got a higher advance based on your 2000 return than you should have gotten based on your actual 2001 return, you did NOT have to pay it back. (Scroll to the very bottom.)

And when we all filed our 2001 taxes in 2002, the tax tables still used the old 15% rate, because the IRS knew that we all got our 5% advance earlier in the year. For those taxpayers who whatever reason did not get an advance (or not the proper amount), there was a worksheet to figure a Rate Reduction Credit to claim on your 2001 tax form, but anyone who got the full advance check in 2001 did not fill out this form.

So there's that.

Then, in 2003, Congress accelerated an increase to the Child Tax Credit (not the Additional Child Tax Credit; I misspoke above). It was supposed to increase from $600 to $1000 at some point in the future, but Congress decided to make that increase effective for the 2003 tax year. Further, they decided to send out the payments immediately rather than make people wait until they filed their returns in early 2004. So for this one, you got (IIRC) a check for $400 per child that qualified you for the CTR. And this time, you did have to subtract the amount you recived in the summer from your tax return; i.e., if got the $400 in the summer, then your tax form would show that you get a $1000 credit, but you had to subtract the $400 off so that you actually only claimed a $600 credit on your 2003 taxes.

Here're the important points:

First, in deciding who was eligible for the advance payment of the increased CTR, they looked to 2002 tax filing, so any person who had zero children in 2002 was ineligible for the advance, even if they had a child in 2003. They, of course, got the full $1000 credit when they filed their 2003 taxes, and did not have to subtract anything off. But they had to wait to get the full credit, rather than get an advance in the summer and then the balance at tax time.

Second, as I said, the credit here applies not to "dependents" but to people who are a "qualifying child". The IRS said, "To qualify, a child must be under age 17, be a citizen or resident of the United States, be claimed as the taxpayer’s dependent, and be the taxpayer’s (a) child, stepchild, adopted child, or grandchild; (b) sibling, stepsibling, or a descendant of any of them, whom the taxpayer cared for as his or her own child, or (c) eligible foster child."

So. What does all this mean for the current proposal? My guess --

1) This is not a tax cut, nor is it an increase in a tax credit. It's economic stimulus. And the article does not tie it to any particular tax burden. Thus, I suspect that this time, we are talking about a free-and-clear rebate, i.e., a handout from the federal government in an attempt to stimulate the economy. So the shenanigans from 2001 won't be an issue.

2) The article says they want to "quickly" send these payments out. The 2001 and 2003 payments went out in late summer and were based on the tax returns that had been due the previous April for tax years 2000 and 2002. If the 2008 payments are to be based on 2007 income and child status, then, I would think they could not go out until well after April returns are received and processed.

Again, because this is economic stimulus and not tax relief, I suspect that they will want to get these checks rolling in a matter of weeks, not months, which means they'll need to turn to the most recent data they have available right now -- 2006.

As for the reference to 2007 income in the article, I'd say either a) that's a mistake, or b) as I indicated above, they will use 2007 withholding reports to determine income threshold, rather than 2007 (or 2006) income tax returns.

Either way though, it would seem that unless they wait for the April deadline for 2007 returns, they will need to use 2006 returns to determine whether additional payments for children (the eligibility of whom will track that for the CTR, I assume) are appropriate.

And as for people who are both "qualifying children" and "workers who earned at least $3,000," I would actually think that perhaps, because this is stimulus, they would go ahead and do double payments rather than figure out which way to allocate it. If they only do a single payment though, I would expect the qualifying child to win out, i.e. the $300 goes to the parent, not the working child.

(You'd think I don't have anything better to do, but it's not true.)

[jlr]

Jay, that was my not-so-subtle reason for putting a link to the current National Debt.

We're not talking deficit spending anymore (not that I think that's a good idea, either). Now we're talking about actually reducing the amount of money coming in and increasing spending at the same time.

And let's get something straight: at least for me, I won't be spending any of this money (at least not right now). If anything, it's going into my IRA or savings account--the exact opposite of what the Prez wants us to do with the money. But just because the majority of Americans are all too willing to go out and spend the "refund" doesn't mean that we all will.

[Klug]

Perhaps I'm being nitpicky, did anyone read this?:

There are indications already that the Senate — the world's most deliberative body — may slow things down when the stimulus package passes the House.

Uh, how did they determine the Senate as the "world's most deliberative body"? Did the Senate set a record for thinking? Did they measure an especially large "Hmmmmmmmm..." I think they meant "world's oldest deliberative body".

[Gardner]

Thanks for all the leg work Brian. But we should all watch what the FINAL wording states and not what is being leaked.

My 42" TV just died, and I know where my money is going to go. And if Brendan's update is accurate, $1500 will go a long way towards that. Doing my best to help the economy. Of course to tick off the Dem's, I'm going to Walmart.

[Brendan Loy]

I think they meant exactly what they said, Klug. That quote is from the Politico, which isn't above a bit of editorializing. And the editorial message of that quote (the Senate is slooooow) fits in perfectly with the point they were making in the rest of that sentence.

In any event, the Senate certainly is not "the world's oldest deliberative body." That honor would go to the British Parliament, no? Or is there one older? Anyway it's definitely not the Senate.

[Gardner]

To those who care:

Virginia's legislature is the oldest representative legislature in the USA. Its history can be traced to 1619. Way before the US Senate

The First United States Congress was a meeting of the legislative branch of the United States federal government, consisting of the United States Senate and the United States House of Representatives. It met at Federal Hall, 26 Wall Street in New York City and later at Congress Hall in Philadelphia Pennsylvania from March 4, 1789 to March 3, 1791

[jlr]

Gardner, the problem with that statement is that the Virginia Assembly was interrupted several times between 1619 and 1776. True, it has been running continuously since before the Senate, but King George III disbanded it a couple of times in the 1760s.

You can also claim that the Confederation Congress was an immediate precursor to the US Congress as it now exists, so you might be able to trace that one back to 1783. The Continental Congress was the immediate predecessor to the Confederation Congress, and that goes back to late 1775/early 1776.

In other words, it's a wash.

[Klug]

Brendan, you're probably right on both accounts. "World's most august deliberative body" is the cliched quote, I think.

Still, I seem to recall a very old Polish parliament that had to have all 500 members agree before anything could be done. Certainly that would be "the world's most deliberative body."

[David K.]

Steve, the problem with the argument you put forth (or rather the professor puts forth) is that the rich are able to take advantage of various tax breaks and such using high priced tax lawyers and lobbyists and end up paying LESS than their proportional share, in addition to having caps on social security taxes.

[yea]

we should go after the underlying causes of the problem rather than relely solely on a bandaid. a good start would be increased rebates/write-off, if not outright subsidization of reserach into alternative energy sources. i hope everyone enjoys the upcoming stagflation.

[David K.]

One way to help the economy would be to stop blowing through money on things like, oh, i don't know, the war in Iraq and quit cutting taxes without cutting programs.

[Brian Foster]

Brendan --

Back on the withholding thing, the point you raise is precisely why I expect that this package will have to look to 2006 income tax returns to determine eligibility. You're right that I was perhaps a bit too hasty in saying that the IRS "knows what we all make" because of withholding, given that some employers may be exempt from such reporting.

(Although my quick research suggests that, with very rare exceptions, a church/religious organization is NOT exempt from withholding income tax from its employees' pay. See page 14 of this IRS publication.)

Seems to me that if they want the checks to go out this spring, they have to rely on 2006 data. If they want the 2007 data, the checks can't go out until mid to late summer.

Unless there's a substitute data source, but as we have discovered, the only source I am aware of (the withholding reports) is imperfect.

Actually, there's also the FICA tax reporting, but I believe I once learned that there was some sort of prohibition on IRS and SSA sharing data. That may not matter here since it appears that this rebate is simply relying on underlying tax data to compute eligibility but is not actually a tax cut. But who knows.

As Gardner says, what will really matter in the end is the language -- if any -- that clears both houses of Congress and gets signed by the President. Anything can happen between now and then.

[yea]

david,

taxes need to be raised and spending needs to be cut, but if we are going to be sustain significant growth we need to become energy independent.

[Megan D.]

Ok I'm just curious because I just recently moved. Do they forward this check or basically what I'm asking is.....how do they know where to send my money???? Is it like Santa Claus and no matter where you are he knows?? lol No I guess not.....silly me of COURSE the government isn't as smart as Santa!! ;-)

[Brendan Loy]

Brian, if I were writing the bill, given that it's a stimulus package so presumably you'd want to give taxpayers the benefit of the doubt in terms of whether they're eligible, I would say that the income calculation should be based on either the taxpayer's 2006 income, as reported on their tax return, or their 2007 income, as determined by withholding, whichever is higher.

But that's just me.

Megan raises an excellent point as well. My 2006 tax return reflects an address in South Bend. I'm sure the current resident of Becky's and my old apartment at Clover Ridge would be happy to forge my signature and cash my $1,500 check, but I'd rather avoid that if possible... :)

[Brendan Loy]

Correction to the "whichever is higher" -- it should be "whichever is more beneficial for stimulus purposes." Since, after all, this thing has both a ceiling and a floor.

[Gardner]

I did a google search and found this:

The Althingi was established in 930 in Iceland by Viking-era settlers. The world's oldest legislative body is now Iceland's official parliament.

It on the internet, so it must be true.

[Sandy Underpants]

Does anyone think the Economy will be recognized as going bad the second Hillary Clinton is sworn in? This "Stimulus" package is totally worthless, getting money is nice, but what kind of long-range effect is it going to make? Nothing was changed, I just got some extra cash one day.

[David K.]

yea, I couldn't agree more, instead of subsidizing big oil we should be investing in alternative fuels research. Everytime someone suggests that of course the right wingers come out of the woodworks to point out how this or that technology is not as efficient as gas (ethanol for example). Of course they are missing the point completely, you do research because there is great potential to IMPROVE those alternatives so that they ARE cheaper/more efficient/domestically produceable. The sooner we can cut the stranglehold that OPEC has on our economy the better. Then we wouldn't even need to CARE about what happens in the middle east except for humanitarian reasons and could react accordingly.

[Sean]

Saving also stimulates the economy. When banks have the money, they can give more loans to businesses and families after homes and whatnot, and if it's in stocks, the capital can go toward funding businesses. Then, later, when the interest and earnings come back, they can spend it and supply the economy the way everyone understands.

Meanwhile, speaking as someone who has chosen to be poor in exchange for the perfect job for me, I made more than 3K this year but less than enough to be taxed. I could sure use $300, but it doesn't exactly seem fair to just take it from somebody else.

[Andrew]

David, I'm all for reducing our dependence on OPEC. The trouble is, if there alternative fuels have such promise, private capital should be enough to spark that, as many investors would see the promise of such fuels and the profits that would come with it. Using taxpayers' money to fund that research and/or subsidizing ethanol production is not effective and merely distorts the markets for food and such.

As for the tax analogy that Steve put forth, that analogy is based on the percentage of taxes the various ten percentiles pay and already includes whatever deductions and loopholes are exploited as well as all types of taxes paid (including capital gains, social security, and so on), so your rebuttal is nonsensical. In addition, who decides what is properly their "proportional share", and what is that definition?

Finally Sean, I don't buy your logic that saving stimulates the economy. What the backers of this tax rebate are saying is that, because consumer spending is slowing down and consumer spending drives our economy to a large degree (something like 60%), we need to put more money in the hands of consumers for them to spend. If you save that money, that's not spending. The banks have enough credit, and corporations are cash-heavy, the problem is consumers aren't spending on retail goods because of economic worries. In addition, the other economic culprit right now is the credit backlash that's killing the financial sector, and the problem isn't that banks don't have money to lend, it's that suddenly they see every kind of lending carrying a much higher risk than before because they just got burned by the subprime fallout. Giving them more money to lend doesn't solve that problem, only time will relax their fears and bring risk premiums down to more plausible, growth-friendly levels.

For the record, I think the rebate is a stupid idea and won't do shit to stir the economy, it's just designed to make it seem like the pols are "doing something". If they really want to give the economy a jumpstart, they should make the Bush tax cuts permanent, erase the AMT, lower the corporate income tax, and/or index capital gains to inflation. Any of those remedies will unlock tons of capital and cause a medium-term boom, as opposed to the current proposed remedy, which is a brief flash-in-the-pan spark that does nothing to change the underlying economic conditions.

[Alasdair]

Andrew - and the chances of the current folk controlling the Senate and the House making any of those changes are ... ???

On a different tangent, this seems appropriate for Brendan ...

[Sean]

Just $300 isn't going to do much, but methinks I'll trust my accountant father's ideas about saving over yours, Andrew.