Is the stimulus package a tax refund, or temporary lowering of the tax bracket?

How does the media suggest the gov't is going to take it back on the

P.S. - I have chosen to wait for the dust to settle before really jumping in, so I am, admittedly, not up to speed on the issue.

I do not know about your sources. The several I have read say the government will literally be sending checks out. You should have yours (if you qualify, and I am betting you do) by summer's end. Just a few of many articles reporting on this:

It's technically a tax rebate, by the way, not a tax refund. Meaning you pocket the check the fed gov is going to send you. Or, preferably, you spend it, according to Congress and the President.

I seem to recall that last time around they added a refundable tax credit for everyone. If you recieved the check in the mail, then it just cancelled out, but if for some reason you didn't get the check (perhaps you hadn't previously filed taxes), this gave you the extra credit when you filed.

If it's d> I do not know about your sources. The several I have read

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Which should do a good job of stimulating the economy of China.

-- Doug

I just read an article on CNN about the finished stimulus package:

"The checks are an advance on next year's refunds, and most, if not all of the money, will be deducted from taxpayers' refunds in 12 months' time."

This is discouraging to me. I spend a good amount of time every December working on our tax withholding. The goal, of course, is to set things up so that we don't get a refund (or end up owing more taxes) come the following April. But now it sounds like I'm going to get a $1500 check in May and end up owing $1500 next April.

Well, I guess I can earn some interest on the money in the mean time. Savings accounts and money markets are returning, what, 3% now? Hopefully that'll be enough to keep up with inflation. :-)

--Bill

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Correction. That's what the article USED to say. Honestly, I copied and pasted the text straight from CNN.com (you didn't expect a lazy bum like me to actually TYPE all that text, did you ;-)). But now that line is omitted. So maybe we won't have to pay back the money after all.

--Bill

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I can't find that in the article you linked -- although I can't imagine anything else that the checks would be, unless the treasury is just going to print more money to cover the checks and let resulting dilution of the money supply (inflation) pay for it. You *know* they are not going to reduce spending by that amount.

Bob

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The government will cover it by borrowing the money (increasing the deficit), they don't need to print it.

-- Doug

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"zxcvbob" wrote

Of course the above is a falsehood.

More importantly, you really can't imagine ways the government (and so taxpayers) will ultimately pay for these rebates?

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They'll either raise taxes, borrow the money, or reduce spending. There's not a whole lot of options. And since the borrowed money has to be paid back eventually, there's really only 2 options -- borrowing just postpones the day of reckoning, unless they are counting on paying back the bonds with worthless inflated dollars.

(I'll probably use my check to make an estimated tax payment, and encourage Wife to use hers to pay down her credit cards. She's gonna hate that.)

Bob

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"zxcvbob" wrote On how the government will "pay" for the impending tax rebates:

I'd add one more general one: Enough stimulus takes place that federal revenue increases. I think this is not likely, but I am noting it for the sake of more completeness.

Aside: I think threads like this are important to soothe the beast of weary, less experienced investors, planning for retirement. The government is not the Mob when it comes to the economy, though some may argue, humorously or cynically or even with religious fervor, it seems like it at times.

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They changed the tax law so you will most likely owe $1500 (or whatever it is) less in taxes for this tax year. Come April 2009, you would be due a $1500 refund, if it weren't for the fact that you already received it around May 2008.

Xho

When in doubt, go to the source:

The check you are getting now is an advance against that _reduction_ (tax credit). Since you're getting the reduction in advance, next year you'll be billed for the usual amount - you're already getting the credit now. So, if you simply estimate your taxes as though nothing had changed, you should be fine.

Sec. 6428 (a) generally describes the 2008 tax reduction. Sec. 6428 (f)(1) generally describes how this advance payment eliminates the credit (i.e. voids the 2008 reduction)

(*) People's whose 2008 taxes (due in 2009) are less than the rebate amount still get the full rebate, even though their 2008 taxes are not reduced below zero.

Mark Freeland snipped-for-privacy@sbcglobal.net

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