| Free Fast Refunds for Poor |
| By Credit Federal |
Published
01/21/2008
|
Taxes
|
|
|
|
|
Fast Refunds for Rapid Recovery
Who's more likely to spend tax refund and free rebate money to revive the economy? Poor people! Rapid refunds may mean a more rapid economic recovery.
Free and Rapid Tax Return Filing
A House divided.
Democrats want to make sure rebates get to more of the poor, even though who are employed yet earn too little to pay income taxes.
The hope: The more people spend, the more the economy will be energized and maybe enough to prevent it from drifting into a recession. Studies have shown that two-thirds of those who received rebates in 2001 spent the money in the first six months.
The theory: People lowest on the income ladder are more likely to rapidly spend refunds, since they typically live from one paycheck to the next, without other assets to draw upon.
"There's a risk of a downturn" in the economy, President Bush said Saturday in his weekly radio address. "Congress and my administration need to work together to enact an economic growth package as soon as possible," he said.
For the moment, the White House plans to give one time rebate checks to people who do pay federal income taxes. That would leave out millions of poor people who actually do work but who don't earn enough to pay income taxes yet do pay Social Security and Medicare payroll taxes. For example, families of four earning less than $24,900 a year would not be entitled to a rebate under the White House approach, said Chad Stone, chief economist at the Center on Budget and Policy Priorities, a research group that focuses on how government programs affect the poor and middle class. Per Stone's estimates, about 22 million households file income tax returns but do not pay that tax because their earnings are so low. An additional 22 million households do not file a return, he said. This group includes many older people on fixed incomes, he said.
Bush is not saying how much the rebate could run. Congressional aides say the White House is considering up to $800 for individuals and $1,600 for married couples. Treasury Secretary Henry Paulson said Bush "is focused on broad-based tax relief for those who are paying taxes. And that's - that was the principle he laid out. This is something that has worked well before. It's worked in 2001, worked in 2003. Get to consumers; put money in the hands of people, letting them spend it rather than the government spend it."
Democratic leaders; on the other hand, are considering a $500 rebate for individuals, according to aides involved in the talks. Details for couples and people with children are being negotiated. Democrats also are looking at ways to make sure more of the poor get the rebates. Lawmakers hope Bush can accept plans under consideration to give the rebates to tens of millions of filers who would not get checks under the White House approach. To this end, the rebates could be limited to individuals with incomes of $85,000 or less and couples with incomes of $110,000 or less, said congressional aides, speaking on condition of anonymity because no final decisions had been made.
Some economists said linking a rebate check to people who pay Social Security taxes is a better way to draw in the working poor. That is because the government imposes Social Security taxes on all workers, regardless of whether the person pays income tax. One drawback to this idea is that it would leave out people who do not have a work history and never have paid Social Security taxes.
Democratic presidential contender Barack Obama has suggested a one-time $250 payment to Social Security recipients as one way to help energize the economy.
Rebates aside, House Democrats and Republicans are considering increases in food stamps and higher unemployment benefits as part of an economic rescue measure. The goal is some relief for the poor, hardest hit by high energy and food prices and a deteriorating employment climate.
"Democrats stand ready to work with the president and congressional Republicans to put together a bipartisan package including tax rebates for most Americans, and one-time increases in programs directed at those who are bearing the heaviest burdens in this economy," Massachusetts Rep. Barney Frank, chairman of the House Financial Services Committee, said in the Democratic radio address Saturday.
In terms of the biggest bang per buck, Federal Reserve Chairman Ben Bernanke said it probably would come from tax rebates or other payments to low or moderate income people "who are likely to spend quickly."
|
Email this article to a friend - click here
Webmasters: Free Credit Content for Your Website!
Multiple ways to use our financial content:
*) You can use our RSS Feeds for automatic insertion and updates
*) You can simply link to this article
