The Associated Press reports that Congress has reached an agreement on an economic stimulus package. The report does not estimate the total size of the package, but it says that taxpayers will receive rebate checks ranging between $300 and $1,000 per household. Businesses will get tax breaks as well.
And the devil is in the details. Under the tentative plan, families with children would receive an additional $300 per child, subject to an overall cap of perhaps $1,200. Rebates would go to people earning below $75,000 and couples with incomes of $150,000 or less. Workers would have to have earned at least $3,000 in 2007 to receive the rebates.
Businesses would receive $70 billion in tax breaks to invest in plants and equipment, and the plan would give small businesses more generous expensing rules and allow businesses suffering losses now to reclaim previously paid taxes. Furthermore, the plan would raise the size of the mortgages that Fannie Mae (NYSE: FNM) could buy from $417,000 to $700,000.
So what does this all mean to you?
If you're among those whose income has remained flat over the last seven years while prices of gas, fuel, and food have skyrocketed, this plan will help a bit. If it passes in its current form, by June 2008 this deal will put enough money into America's pockets to cover part of a month's worth of bills. And it will probably add somewhere between 1% and 2% to America's $14 trillion economy. Plus it would lower the interest rate for the huge mortgages undertaken to pay for houses up to $700,000.
But this plan has been designed to give political cover to its proponents. The current administration hopes it will push the recession into 2009. And presidential aspirants hope it will buy them some votes -- or at least keep them from being criticized for not caring.
While it will put some more money in the pockets of many, it will add about $150 billion or more to the deficit. And that could cost you more as the dollar drops in value.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
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Reader Comments (Page 1 of 3)
1-24-2008 @ 2:25PM
tina r. said...
Once again people who are in the above 150K but below 200K are reminded that there is no incentive in this country to make money. Bah.
1-24-2008 @ 6:34PM
Mark said...
I can some who are fortunate, just don' appreciate it!
1-24-2008 @ 7:28PM
Lucy said...
There is always incentive to make more money. It's called greed. Another is to keep you out of the below $75K range. You wouldn't like it here.
1-25-2008 @ 2:24PM
EVERETT said...
I THINK ANYONE FORTUNATE ENOUGH TO MAKE THAT KIND OF MONEY SHOULD BE VERY THANKFUL THEY HAVE HAD THE OPP.TO DO SO AND NOT BE MORE GREEDY
1-24-2008 @ 2:43PM
gus brau said...
The oil companies get a 50% write off immediately for all the new plants they have built & new equipment they have purchased. Where did they build new plants & what new equipment? The other big businesses hire illegals so they don't have to pay payroll taxes. The average American makes less than $85,000.00 a year & has a family,medical bills,food & school supplies. Who is making out with this tax rebate?
It puts money right away into the hands of the people who don't need it & the people who do & will spend it have to wait 6 months & then be taxed on these rebates next year, while big business gets another tax write -off. Our elected officials are more concerned about their pockets than they are about the people who elected them.
Big business & the Oil Companies have shown the American public who is more important.
1-24-2008 @ 11:20PM
chrisalan said...
Gus, you have no clue. Business is taxed at 40% and tax breaks give companies the money back in lieu of giving it to uncle sam to reinvest in assets that CREATE jobs. Good jobs!
1-24-2008 @ 3:07PM
chris L said...
So, how much of this rebate money goes to pay for bad habits...cigarettes, drugs, alcohol?
1-24-2008 @ 6:31PM
Mark said...
Or how much to the companies who manufacture them.
1-24-2008 @ 3:16PM
AL KENYON said...
So, I guess being retired on social security and pension with no earned income, I get no help. What a deal.
1-24-2008 @ 4:06PM
Kevin said...
At least you have a pension and Social Security! Pensions went by the wayside for most of us 20 years ago and many of us will never see Social Security! Sorry - I can't feel bad for you...
1-24-2008 @ 6:12PM
Carol Ann said...
We retired people are being thrown under the bus by the Democrats who insisted upon this change. It is the retired people who depend upon their 401Ks, and IRAs, who have been most adversely affected by this stock market downturn. We should remember this at the polls in November, that being the only language that politicians understand!
There are millions of retirees! Let them hear from us at election time!!
1-24-2008 @ 6:25PM
Carol Ann said...
We retired people are being thrown under the bus by the Democrats who insisted upon this change. It is the retired people who depend upon their 401Ks, and IRAs, who have been most adversely affected by this stock market downturn. We should remember this at the polls in November, that being the only language that politicians understand!
There are millions of retirees! Let them hear from us at election time!!
1-28-2008 @ 7:58AM
PCC said...
all to help a population and a country living beyond its means It all has to stop sometime but not in an election season
1-24-2008 @ 3:55PM
lanny drouillard said...
by the time this stimulist package reaches the average consumer.........we will bw either out of the recession or dead.........
1-25-2008 @ 4:44PM
gail said...
The best way to put money in the eceomy is to lower the gas to 30 cents less . Then we all benifit
1-24-2008 @ 4:51PM
eve said...
is the 150,000 income from last year? this is
a new year, im unemployed and my husbands commision has been cut in half! we made 150,000 last year,
but we are not "making" 150,000 this year! need clarification!
1-25-2008 @ 5:56PM
mcgiveradio142 said...
If you made 150,000 last year then you don't need 1200 bucks, so kiss off!!!
1-24-2008 @ 5:04PM
ellswortho said...
send me $50.00 a week to fill my car with gas and i'll be happy
1-24-2008 @ 6:00PM
jcb said...
I thought buying votes in this country was against the law. No wonder why both parties got behind this welfare package -- to which my family will get nothing, except the bill.
1-24-2008 @ 6:07PM
Dale Tauzin said...
I understand about working class households needing this tax refund, I'm sure raising a family now days with the very high cost of living has pulled apart a many household budget but the way its stated it will leave out a very large group of Americans that has no recourse, they are to old to get a job now days & they are on fixed incomes, if they get a raise on their Social Security checks then Medicare raisies our premiums until nearly the hold raise is eaten up by Medicare (by the way in case there is some out there that don't know about these increases, they are only like 1 or 2 %), seems to me that senior Americans that are on fixed income pay the same price for a loaf of bread & a gallon of gasoline as the working class does, its bad enough that Congress has seen fit to cut the amount of the refund checks to less then half of what they started with & now the 30 to 40 million Americans that are on fixed incomes find out that they are not going to get anything, well I think that when it comes to voting we should show the ones in Congress now that their jobs in Congress is not a shoe in for any of them, they can be removed...I'm 68 years old & I have seen lots of them come & go & I have learned that anytime that a Republican president & a Democraticly control Congress stricks a deal, look out because some group of people in this couintry is fixing to get screwed...this time looks like its going to be us old timers...truly this is a free country if you can afford to pay for it...way to go Congress, no wonder we as citizens of the USA have no faith in our elected Congress & President ......
"The Man From Texas"