Sunday, February 17, 2008

Government 'Gifts'

Secretary of the Treasury Henry Paulson called the stimulus package a "gift for the middle class." What kind of a gift is it, though?

If you haven't tried it yet, PBS has a calculator to figure out the amount of your 'gift'.

According to what I've read at CNN and several of the personal finance sites, the 'gift' is based on the 2007 tax year, and your tax return must be filed to be eligible. (Not to mention the other income eligibility requirements.) So, would that mean the money received is an additional refund of taxes paid in 2007? I wouldn't exactly call that a gift. That's more like a mail-in rebate.

This "gift" isn't a rebate though. It's based on 2007, but is actually a pre-bate of money we'll be paying in taxes during 2008. Except, we have to report it in our 2008 tax return, and pay taxes on it. I'm actually a bit fuzzy about whether it's counted as taxable income, or if it will be deducted from any refund amounts / added to taxes due next year. Again, not much of a gift.

The AGI caps for the stimulus checks are $75k for an individual, $150k for a couple, filing jointly. If this is truly a gift, shouldn't it be something for every single person on the tax rolls?

From what I understand, millions of retired and lower income individuals will also be receiving checks as part of the stimulus package, even though they have little or no tax liability at all. I've heard this called relief from payroll taxes. I'm pretty sure that was the reason for the Earned Income Tax Credit, wasn't it?

For the person who has no tax liability to offset, and who will not be required to pay taxes next year, the stimulus package may be called a 'gift'. Or, maybe not. Considering this is an election year, and the politicians adjusted the stimulus package until it included the maximum number of voters, I think the proper term is bribe.

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