January 24, 2008

Stimulus Package

Marc Comtois

The stimulus package:

- Individuals must earn at least $3,000 to get a $300 rebate
- 117 million people will get rebates, 35 million of whom don't pay taxes
- Higher-income individuals would receive up to $600
- Couples could receive $1,200 plus $300 per child
- Rebates would be limited to individuals earning less than $75,000 and couples earning less than $150,000.

Next year, those paying taxes will be taxed on the "rebate" as regular income. Those who don't make enough income to be taxed will not. Does that still make it a rebate? At least a partial one for taxpayers. But it's simply a handout for non-taxpayers, not a rebate. Incidentally, according to the AP report:

Bush has supported larger rebates of $800-$1,600, but his plan would have left out 30 million working households who earn paychecks but don't make enough to pay income tax, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center. An additional 19 million households would receive only partial rebates under Bush's initial proposal.
So money intended for the average American tax-payers was pulled so it could be sent to non-taxpayers. Nice.

Additional components:
- The AMT will also be suspended for 2007
- Businesses will be given incentives to invest in equipment
- Fannie Mae and Freddie Mac will be temporarily allowed to buy mortgages of up to $625,000, exceeding a $417,000 federal limit.

Not included:
- Extension of unemployment benefits
- Provide additional food-stamp aid

Hey, is it an election year or something?

Comments, although monitored, are not necessarily representative of the views Anchor Rising's contributors or approved by them. We reserve the right to delete or modify comments for any reason.

I think you miss the point of the economic stimulus package. It isn't intended as some pat on the back for hard-working taxpayers (who admittedly appear to get a raw deal), it is meant to spur immediate spending in the economy. Who is most likely to view $600 as winning the lottery and then go out and spend it on consumer goods like we need them to? Answer: The poorest among us. We don't want people putting the money in the bank, we don't want them saving it, we don't want them doing what most rational people do when they see storm clouds on the horizon (like a recession) - we want them to spend every penny of it as quickly as possible and the least financially savvy among us are the most likely to do that. Otherwise, we don't have the economic impact from the "tax rebate" (it is anything but that) that we need to help prop up the economy.

This isn't about awarding people who don't pay taxes, it is about making sure this money gets spent as fast as possible and not stashed in the bank. That is why it doesn't go to the highest earners and why the lowest earners are some of the best people to give this $$ to - short of the government simply buying consumer goods on its own and handing those out to taxpayers instead. We need people to blow this money fast, and I tend to doubt someone who pulled in about 10k last year is going to hold onto $600 for very long.

It may seem like rewarding those who don't work as much as you and I, but in the end we just need that money spent on junk ASAP and most middle and higher earners aren't going to run out to blow that cash like we need them to.

Posted by: Mach at January 24, 2008 7:37 PM

Anyone receiving a check should immediately use it to buy gold or silver.

Posted by: PDM at January 24, 2008 7:59 PM

So basically we should just forward the check to China, is that right Mach?

Posted by: Marty at January 24, 2008 8:57 PM


No. We've already paid China. They tend not to let you buy on credit (at least not for most of the goods as I've heard), so they already got paid. They already "have the check." What you should do is save the check and hope everybody else spends their checks. Or, spend it so we can recoup some of what we had to pay China up front to get that cheap junk to begin with.

The key is to spend it (as far as the economic boost is concerned), otherwise that stimulus won't "stimulate" anything.

Posted by: Mach at January 24, 2008 10:34 PM

Yeah, but back up, Mach.

First of all, we're running a deficit on the federal level as well. What is being cut from the budget to pay for this ... convenient, election year "rebate"?

If people who don't pay taxes are in on the divvy, it's not really a "rebate"? So what is it?

And what if people decide to spend some or all of this check on a backed up utility bill or a delivery of fuel oil instead of discretionary consumer items?

Posted by: Monique at January 25, 2008 7:39 AM


Nothing is being cut. It is something we will pay for again down the road, but if we don't do it now the potential disaster looming on the horizon (which might hit anyway) could be even more damaging. A depressed dollar, inflation, unemployment, tight credit, and lack of trust in our economy helps almost nobody - especially not the middle class. If it costs me $100 in taxes a few years from now to stop an economic downturn that could cost property owners thousands, anybody holding American currency a few percentage points on an exchange, etc. etc. then it is worth the $100 years from now to prevent the loss of a few hundred or a few thousand dollars in investment value today.

It definitely isn't a "rebate," it is an injection of cash into the market (hopefully), nothing more. Looking at it as a "rebate" views it as a reward, which it isn't. This is to save the economy, not to reward any taxpayers, so the reward part won't make sense or seem fair because the reward has nothing to do with this.

If they spend it to pay off debt or they invest it we won't see the returns we need. If they spend it on heating oil then fine, so long as they don't squirrel away the money they would otherwise have spent on heating oil. And even heating oil isn't a bad purchase with it, since it is a good, but if they'd spread that around instead of blowing it all in one place we'd see a better (for the market) result from it - we need people to buy more than they normally would, and oil doesn't really fit that.

This seems like a hand out to some people who don't deserve it to some people, but it is going to help anybody who has property, investments, no job security, debt, and even just a dollar bill if we essentially force people to spend cash now (by giving their future tax dollars out to those most likely to spend it today). Sounds like an injustice, but people wouldn't do it on their own and we need them to. If all goes as it should, that small future tax most of us have to pay will be much much less than what most people will lose if the economy heads much further south.

Posted by: Mach at January 25, 2008 8:21 AM

Mach - it has to cost you more than $100 in taxes a few years down the road. It has to cost you $600, plus interest, in taxes, otherwise you haven't paid it back. Actually, it will cost the high income people who don't get a stimulus payment (its only a rebate unless you work for the Ministry of Truth) a lot more than $600 as they are the ones who always pay disproportionately.

Posted by: chuckR at January 25, 2008 8:35 AM


It absolutely does not cost me $600+int to pay to pay it back. The payback will be spread across all taxpayers and will be a % increase, not a flat rate tax. So, all those who don't even get the "rebate" will be paying it back and at a % that will probably cost them more than $600 (though they also have much more than $600 on the line if the economy tanks so it is still worth it for them). So you are absolutely correct that it will cost the high income people $600+, but they'll probably "save" much more than that on the investments i mentioned previously so it benefits them in the long-run. Most would probably "save" that just by preventing a minute drop in property values. But you are right, they will be paying disproportionately - but also benefitting disproportionately as well. The lower earners get their $600 worth of junk from the "rebate", the higher earners prevent thousands of dollars in lost investment value in property, stocks and bonds, and cash devaluation.

Trust me, it sounds like most people get hosed, but really everybody gets something out of this and the ones who are most upset (the middle class who doesn't understand why this works this way) are going to get some of the best benefits from it - which is why the government went ahead with it in the first place - it works and we don't need people to understand it for it to work.

Posted by: Mach at January 25, 2008 10:45 AM

Mach - I don't understand why you think the middle class is upset. The only people not getting the stimulus payment are the approximately 3% who make more than $150K in 2007. The trivial cost of extending the payment to them - the supposed $100 billion cost becomes $103 billion - just highlights a class warfare aspect of this. The top 1% in income pays 37% of income tax, the top 5% in income pay 58%, so it sure looks like a gratuitous slap in the face. Who says they wouldn't spend the $600, even if its on dinner and a bottle of Veuve Cliquot?

The real problem with this is that it kicks the can down the road. Its not this specific bribe to voters by Washington incumbents, its all of them in aggregate. You and I won't pay, our kids will.

Posted by: chuckR at January 25, 2008 12:25 PM


I have yet to hear a middle-class (self-described or actual) person say "this is great." I've heard plenty of "people who didn't even pay are getting a rebate and I get next to nothing despite paying my taxes and working hard." My perception that the middle class is upset, but largely because they misinterpret this "rebate" is based solely on my current anecdotal experience. I've yet to poll anybody on it, but I think you'll see a lot of anger directed towards this (just listen to Yorke).

I would suggest that most financially savvy people (read: likely going to be people outside the <20k/year group) aren't going to say "gee, $600... let's go blow it on some stuff." But that is what we need them to do. It is certainly a guess that lower earners are going to be more likely to spend the money fast like we want people to, but I believe it is an educated guess and one that will be proven right in time. The highest earners (>150k and thus excluded) are less-likely to be in need (or want) of greater disposable income and thus less-likely to be spending anymore money tomorrow if we give them $600. I just don't see that $600 changing the spending habits of most people earning more than 50k/year, but I would guarantee that it almost universally (like 99.9934%) alters the spending habits of those earning under 30k/year, just like we need it to. Sure, some higher earners would go out and blow this gift like we need them to, but I don't think we can be nearly as certain of them spending it immediately (and continuing to spend at least what they were BEFORE the rebate as well, since we need a boost in their net spending) as we can be that people with far fewer assets and far less disposable (or even gross) income will.

I agree there are plenty of "bribes" where votes are bought and the buck is passed, but this is not one of them. $600 with a recession looming isn't enough to motivate most people to vote one way or the other, but over $100B in cash being dumped into the economy (hopefully) is what we need to restore confidence and increase earnings (kind of a chicken and egg scenario) so that we don't all take a digger on the investment I previously mentioned. I understand not wanting to pay in the future, but if the cost of not paying later (like the losses we stand to take if nothing is done) is greater than the cost of paying later - then we pay later. I believe that we stand to lose more now if we don't do this than if we do push the payment a few years out.

Posted by: Mach at January 25, 2008 1:23 PM

My husband receives disability and pension he has his taxes held out and I only made 2800 this year but pay taxes we file married with 2 children will we get this rebate or refund what ever its called

Posted by: Loretta at January 25, 2008 9:34 PM

If you receive a check this year be it $300, $600 or $1,200 plus dependant add on just remember, next income tax period you will have claim the check amount as income and pay taxes on the amount both on your state and federal income tax returns.

Just think about that amount kicking you into the next higher tax bracket!

Posted by: Ken at January 26, 2008 2:02 AM

I owe the IRS money.If I am do any refund this year,The IRS is suppose to keep it and apply to my bill. My question is , will I receive a $600.00 along with everyone . If so, will the Irs keep my money and apply it toward my bill. Is this Stimulus money different from filling simple returns , and being owed a regular Rebate .

Posted by: James R.Knight at January 26, 2008 4:29 AM

Has anybody thought buy american?

Posted by: JLM at January 26, 2008 1:24 PM

Quit asking questions and just spend, JLM, spend.

Posted by: Monique at January 26, 2008 8:45 PM


At this point it doesn't matter where the thing is made, so long as it is sold here by an American company. I too try to avoid "made in China" (partly lack of quality, partly because I hate their approach to business, partly because I don't need to help them become the next super-power), but American companies have already paid for those Chinese goods. So, if you buy some that money is staying here and that is what is important at the moment. Be choosy AFTER we (hopefully) dodge this recession.

Posted by: Mach at January 27, 2008 10:46 AM

We were discussing this at work today.Is it if you have a refund due you in 2009 on your 2008 taxes the IRS will deduct the amount of the stimulus check from your refund ? Or will you just be taxed on the amount of the check as added income. Thanks

Posted by: Jim at February 14, 2008 4:51 PM

I just want to get my two cents in here. I am a single Mom, I don't have child support or any other "help". I work well over 40 hours a week and raise three children on my own. I do not make that much money, but I do qulify as being low income. So ....Mack....not every low incme family has no job ...as a matter a fact most of us are the very hard working people who just plainly get paid less for what we do. People like you are the reason why....well I won't go into that...but have a nice day.

Posted by: Vanessa at April 9, 2008 8:19 AM