How U.S. government partially recoups infrastructure project costs through taxes. A discussion of Obama's economic stimulus plan & link to a 2009 tax rebate article.
With the U.S. economy in turmoil, there has been much talk of a 2009 economic stimulus plan in the works. This stimulus plan, known as the American Recovery and Reinvestment Act, would not be a duplication of 2008 efforts. This one would provide for economic stimulus in the form of money for infrastructure projects to inject cash back into local economies and stimulate job creation.
2009 Economic Stimulus Package: Why Would the Government Spend Money?
It doesn’t make sense to an individual, really. The last thing a person in debt and out of work would do is open up a credit card and spend his or her way out of the problem. That would be the clear road to bankruptcy for most. So why may it make sense for a government to do just that?
Government spending in the form of an economic stimulus injects money back into the economy, which indirectly results in increased investor and consumer confidence. This ultimately bolsters the stock market.
The government eventually recoups a large portion of the money doled out in the form of taxes.
Exactly How Does the Government Get Most of It Back in the Form of Taxes?
When the government pays for infrastructure projects, it is essentially loaning stimulus money to the people, not giving it away with no prospect of return. Taxes are incurred at several levels. Consider the tax implications of a scenario where the government pays a business for construction work.
That business is taxed on the income (less expenses).
The subcontractors used by that business are taxed on their income. This will result in another level of taxation at either corporate or individual tax rates, depending on the type of entity under which the subcontractor operates.
The employees of all involved businesses are taxed on their income.
Other taxes come into play as well – unemployment taxes and social security come to mind.
This example illustrates that when it comes to economic stimulus in the form of infrastructure projects, the federal government is essentially making loans to the American people that are eventually repaid in part due to various levels of taxation.
More Details: 2009 Economic Stimulus Package, American Recovery and Reinvestment Act
The article Talk of a 2009 Obama Economic Stimulus Plan defines infrastructure projects and discusses the potential of monies being slated for “green” projects like high speed transit and energy efficiency upgrades.
On a related note, the article 2009 Tax Rebates, Second Stimulus Checks discusses the likelihood of another round of rebate checks as part of an overall government stimulus package.
Furthermore, in a January 28, 2009 post on the Barack Obama website, the Obama team noted a website, recovery.gov, on which Americans will be able to track stimulus package spending if the American Recovery and Reinvestment Act is ultimately passed.
Resources:
U.S House of Representatives website
American Recovery and Reinvestment Act
The copyright of the article 2009 Economic Stimulus Package – Obama's Plan in American Affairs is owned by Lena Gott. Permission to republish 2009 Economic Stimulus Package – Obama's Plan in print or online must be granted by the author in writing.
If the government want is going to approve a "stimulus" package
that the American tax payer will end up paying for any way, lets kill two
birds with one stone and have them pay off everyone's primary residence
mortgage. This would be less that 1 trillion dollars and all that sub prime
mess would be cleared up. It would also boost everyone's credit rating
making lending to them easier. I know if I and an extra $1400 a mo I could
really stimulate the economy. Lets be honest too as Americans most people
would enjoy 6mos to a yr of mortgage free life then refinance the loan and
be in debt again, so it is really a win win for the gov to do this.
Feb 6, 2009 11:26 AM
Guest :
The explanation of how the stimulous package works assures me that each
dollar spent will result in enough economic activity to generate government
profits in excessg of the government dollars spent. That simply means that
the tax rates are too high !
If that is the case then
Rome, Nazi Germany, Russia should still be going strong! They all tried it
and ultimately failed completely. It actually is an attempt by the US
Government to keep the fantasy land economy going just a while longer. The
ultimate result of this type of economics is the wholesale disposal of this
country and it's remaining assets. It may be that the American Public will
finally wake to the horrors in Washington ignored for so long and do
something about it! If the spending targets of this package are
so wonderful for this country why won't they publish the line items and
sponsors? Maybe we could just use the tax revenues generated by the 1
trillion dollar national debt we'll have this year ! My grandchildren
thank the dems for their largess lavished on their favorite pork barrel
subjects !
Feb 9, 2009 9:24 AM
Guest :
I think the banks should take out loans from or tax money and when they get
back on their feet they pay us back with interest. It would be hard to do
but its possible. I mean its our money that were giving to the system.
Feb 10, 2009 3:22 PM
Guest :
this 9 trillion bailout is a sham! that comes out to almost $80 thousand
per taxpayer. why not give every household $50 thousand? it would be
cheaper and we would have the money on ONE stipulation-you have to go to an
accountant to settle your debts first. they will be able to deal with the
credit companies on a payoff. by doing so you pay off your cards, your
dept. store cards, your auto loans payed up. you can even get your house
caught up. ONLY then would you get your money. so say you have $35 thousand
in debt so after all is said and done you get the remaining $15 thousand
minus taxes on the $50 thousand. by doing this the economy is back on
track and peoples jobs can be retained and we can start this over the right
way. we dont need to borrow money to help the idiots that started this in
the first place. put the money where it belongs!!!
Feb 15, 2009 3:17 AM
Guest :
The stimulus undid Clinton's welfare reform. During hard times this may be
good. The problem is that increased welfare, food stamps and unemployment
benefits spending without a deadline, like when the economy recovers, just
increases spending endlessly. Two Republican senators proposed that when
the GDP recovers that these be scaled back and it was denied. We will have
to pay back all of this. My question is why would you want to KEEP
spending after the economy recovers?
Feb 3, 2009
