Federal Tax Rebates Coming Soon, June 2008

Looks like Members of Congress and President Bush are nearing an an agreement that will put a bunch of money into the US economy this June. Both Democrat and Republican leaders in the Congress said today that a deal is close and rebate checks of $300 per person and up to $1200 per family could be mailed out to Americans starting in June. Unlike the previous government rebate in 2001, all Americans that pay federal income tax or social security taxes will be eligible for the rebate. Since some American taxpayers get more money back from the federal government than they pay in through withholding taxes during the year, in the previous federal rebate they were excluded when it came time to mail out the checks. However, this time those Americans will receive a rebate check too, but not as large potentially as Americans that pay both income tax and social security taxes.

As it stands right now, individuals that pay in no net federal income tax for the year will receive a rebate of $300. Families that pay in no net federal income tax for the year will receive $600 plus $300 for each dependent child in the family. For individuals that pay both federal income tax and social security, they will receive a rebate of $600. For families that pay both federal income tax and social security, they will receive a rebate of $1200. If an individual earns more than $75,000 or a family earns more than $150,000 they will not be receiving a rebate under this program. Remember that these money amounts are still subject to change in the days and weeks ahead as the US House of Representatives and the US Senate work out the final details. That said, the start of the summer of 2008 could be a bright one for most people as much needed money will be showing up in the mailbox just in time for summer vacation.

There is a downside to all this free money that the federal government will be sending out to millions of Americans this summer and that downside is that the government does not have the money in the bank to honor all those checks. Instead, the US federal government will go into the world marketplace and borrow the $150 billion plus that it will take to make these rebates viable and our nation will go further into debit in the process. The timeliness of these check arrivals is good because when they start arriving at the beginning of the summer, most people are likely to start spending that money. The only way these federal rebates are going to help the struggling US economy is if everyone spends the money. With these rebate checks reported hitting mailboxes during the first part of June, then I think it is likely that most of this money will be spent and that will give a big jump start to the US economy, even though it will be short in duration.

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