Bush and House Push US Tax Rebates
What the New Tax Plan Could Mean For You
US President Bush and members of the House put into action a tax rebate program to stave off an imminent recession.
Tax Rebate Plan
The federal government appears to have been listening to economists' prediction of an impending resession and, in their latest effort to prevent an economic crash, has developed a plan to issue income tax rebates of between $300 and $600 for individuals and up to $1,200 for couples. Those who earned over $3,000 and paid taxes in 2006 will be entitled to up to $600, while those who earned over $3,000 yet didn’t earn enough to pay income taxes during that period would be eligible for up to $300. Couples filing jointly would receive between $600 and $1,200 following the same stipulations. The plan sets a cap of a $75,000 for single filers or $120,000 for couples, above which the rebates begin to diminish. This was done in order to benefit lower-income earners, a move which many are calling a complete reversal to Bush’s previous tax plans.
A Rapid, Bipartisan Response
The agreement between House Speaker Nancy Pelosi, Republican leader John Boehner and Treasury Secretary Henry Paulson is now under review by the Senate, and Americans everywhere are anxiously awaiting their decision. President Bush has quickly moved to back the plan, saying, “I urge the House and the Senate to enact this economic growth agreement into law as soon as possible.” Many are calling the rapidity of the negotiations over the bill the biggest show of bipartisanship the country has seen since the bitter days of 9/11. The bill is expected to pass through Senate within the next few days, though few expect a response before the weekend.
The U.S. Dollar Dives
America has felt the painful crunch of our nation’s ailing economy this past year. Despite the Federal Reserve’s efforts to cut interest rates, the strength of the United States dollar is rapidly waning. The housing market has wilted over the past year and economists have warned that a new recession is inevitable. Many fear things could get much worse before they get any better. "Americans could just get scared by a barrage of bad news," says David Wyss, chief economist with Standard & Poor's. "The stock market could continue going down because of foreigners pulling money out, and between that and home values going through the floor, it could lead to a real pullback of spending, particularly by Baby Boomers who are getting close to retirement."
Looking Ahead
Some say the new measure, though well-meant, has come too late to stave off the imminent recession, the first since 2001. “As far as I’m concerned, they’re six weeks behind,” says Dr. Martin Feldstein. Feldstein is the President of the National Bureu of Economic Research, the agency that officially declares the beginning of a recession. One of the problems with the tax rebate plan is that even if the Senate quickly agrees to pass the bill, the end of tax season comes in mid-April, which means that the IRS could begin processing the rebates as late as early May. With the eight-to-ten week average refund mailing time, taxpayers who wait until the last minute to file wouldn’t be seeing their rebate until mid-July.
Still, there is a grim optimism about backers of the new stimulus measure. "I think this is a good big first step, I think it's the right step," said Mark Zandi, chief economist at Moody's Economy.com. "I think for many hard-pressed households, a few hundred dollars in their checking account is going to make a big difference for them." House Speaker Nancy Pelosi seems to agree, saying, “I do know that it will help stimulate the economy, but if it does not, then there will be more to come.”
