Congress finally got an economic stimulation bill passed today that will supposedly prop up the economy by shelling out cash to tax payers as a tax “rebate”.

Over 130 million households will get tax rebate checks starting this spring progressing through the summer. The Senate tacked on additional rebates to President Bush’s original tax plan, adding 20 million senior citizens and 250,000 disabled veterans to the package.

Treasury Secretary Henry Paulson said the Internal Revenue Service will get to work immediately, but it will take two to four months for the rebate checks to arrive. Of course, they want to process your tax returns first…

Single taxpayers will get $600 and couples $1,200, plus $300 for each child under 17. Anyone with at least $3,000 in earned income last year will get $300, as will seniors on Social Security, even if they paid no income taxes. The rebates phase out beginning at $75,000 in adjusted gross income for individuals, $150,000 for couples.

I’m still not convinced this will do a darn thing for our economy. If we really wanted to stimulate the economic health of our country, we’d create tax incentives for companies to spend big money. Of the $168 billion in rebates, I predict half of it will actually turn around and be used for discretionary purchases that influence economic data.

Somehow I think we could entice big businesses like Microsoft, Google, oil companies, etc to spend well over $168 billion if given adequate tax incentive.

Just another example of how our government mismanages the economy.

Economics, Taxes economic stimulation, rebates, Taxes

Today President Bush shed some light on how the government plans to artificially stimulate the economy.

The President said he’s looking for “direct and rapid tax relief” for both consumers and businesses. To achieve this, he plans on implementing an income tax rebate of between $300 and $600 per person, and depending on your circumstances, your rebate may be even bigger.

The white house is looking for a repeat performance from the plan implemented in 2001. It seemed to work back then, however I think the direct effect was a bit over inflated.

But this time it’s different.

We’ve got a different situation this time, with different economic pitfalls pushing the health of the economy down the tubes.

Housing is in the dumps, the stock market is sinking, interest rates are going down, and we’ve still got a credit “crisis” that I feel is under-reported and misunderstood.

The only way distributing an income tax rebate will work to stimulate the economy is if you turn around and spend your rebate. So the question really lies with the American tax payer. What will you do with a tax rebate?

Considering the credit crisis, the mortgage default rate, high energy prices, and the overall increase in consumer staples (like groceries, household goods, etc), I suspect that instead of stimulating the economy by going to Best Buy to buy that big screen TV you’ve always wanted, most people will use it to catch up on their mortgage payments, pay off the credit card, or help pay for gasoline or higher utility bills.

In no way will using this money to dig yourself out of debt help to stimulate the economy.

So the question lies with you.

If the government were to give you a check for $600 right now, what would you do with it?

Economics, Finance economic stimulation, Economics, Finance, rebates