Reading Between the Lines on the Proposed Stimulus Package
Monday, January 28th, 2008By Patricia L Johnson and Richard E Walrath
The $150 billion dollar economic growth package was announced by President Bush on January 24, 2008 after a bipartisan agreement was reached with the leaders of the U.S. House of Representatives. The plan consists of $100 billion in temporary relief for families, and $50 billion in business incentives.
The plan calls for taxpayers to receive rebates of “up to” $600 for individuals, and “up to” $1,200 for couples. Anyone eligible for the above, would also be eligible for an additional $300 per child, which sort of gives you the impression that if you’re married and have two kids you’re about to receive “up to” $1,800 from Uncle Sam.
Don’t rush out and spend the money yet!
Whenever this administration uses the words “up to” you can bet your booties you’re going to get less, so how much less? Department of the Treasury examples follow:
Married with children:
1) Married couple with two children*, earned income of $4,000, no federal income tax paid.
Individual rebate = $600
Child tax credit = $600
TOTAL = $1,200
2) Married couple with two children, earned income in excess of $3,000, AGI = $45,000, federal income tax is $323.
Individual rebate = $600
Child tax credit = $600
TOTAL = $1,200
3) Married couple with two children, AGI = $48,000, federal income tax is $773.
Individual rebate = $773
Child tax credit = $600
TOTAL = $1,373
4) Married couple with two children, AGI = $80,000, federal income tax paid in excess of $1,200.
Individual rebate = $1,200
Child tax credit = $600
TOTAL = $1,800
5) Married couple with two children, AGI = $160,000, federal income tax paid in excess of $1,200.
Individual rebate = $1,200
Child tax credit = $600
Phaseout reduction = ($500) [5% x ($160,000 - $150,000) = $500]
TOTAL = $1,300
*All children referenced in the examples are qualifying children for purposes of the child tax credit.
Looks like you won’t be pulling in $1,800 unless your adjusted gross income is more than $80,000 and you have paid in more than $1,200 in federal income tax.
The current agreement also provides a temporary tax cut for businesses providing them with the opportunity to purchase equipment this year and deduct an additional 50% of the cost in 2008.
Treasury Secretary Paulson says that he hopes the Senate doesn’t meddle with the stimulus package. He’s afraid that the Senate might put some stimulus into it–like money for food stamps as well as extended unemployment compensation.
The package does not provide assistance in the form of extended unemployment insurance benefits, food stamp money, or spending on infrastructure, but it does provide some assistance for homeowners who are struggling to keep their homes in the current mortgage crisis.
Will it be enough?
Of course not!
How much worse are economic conditions today than they were when the first Bush tax-cuts went into effect?
Is there anyone who would disagree that they are much worse today than they were then?
So, why are we talking about a $150 billion stimulus, maybe, when hundreds of billions in tax-cuts were put into effect then? Granted, most of those Bush tax cuts went to the rich and business, and we see how much benefit they provided to the economy.
The purpose of the Jobs and Growth Plan of 2003 was to stimulate the economy with the influx of $350 billion dollars. On a temporary basis it succeeded in providing some stimulus, but in 2003 we weren’t looking at 1.8 million subprime loans getting ready to reset with higher rates over the next two years.
If the situation is far worse today–as it is–how is $150 billion going to solve the problem?