If President Obama’s economic stimulus plan is signed into law is it currently stands, individuals stand to receive a tax credit of $500 and couples stand to receive a tax credit of $1,000. Provided you’re not disqualified for earning too much money, $75,000 for an individual or $150,000 for a couple. Taxpayers might receive this credit either by claiming a credit on the 2009 and 2010 tax returns or by reducing withholding from paychecks.
There is little hard evidence that last year’s stimulus payment helped the economy. In fact, it has done more to confuse and anger taxpayers who now believe they are required to return the stimulus payment to the government, a widespread misunderstanding thanks to the way the Congress decided to facilitate the credit.
While I explained that in whole the 2008 economic stimulus payment would not affect tax returns, astute people who file their taxes online or use software to calculate what they owe or receive have noticed that changing the amount in the line for the recovery rebate credit affects the amount of their refund or payment due.
There’s a simple explanation: If I tell you I’ll give you and nine of your friends $100 next year, but then offer to give you and only eight of your friends that $100 this year to provide a head start in spending that money, you can’t come to me next year and get that $100 again. You have one friend that will get to collect the $100 next year, but you and your nine friends who received the early check don’t receive it again.
An additional new tax credit created with the possibility of receiving a partial or complete payment in advance will cause more confusion when it comes time to file 2009 tax returns.
For me, another $500, especially if spread over two years, will have absolutely no effect on my consumerist spending tendencies. I would save the money, not spend it or pay off debt. You could argue that those of us who save the money are just passing along funds from the government to banks, but banks can’t use customer’s deposits the same way they can use a cash infusion directly from a government bailout.
Will a $500 or $1,000 “stimulus” affect your ability or desire to save, pay off debt, and spend?
February 13 Update: The Senate and House of Representatives have both passed the compromise version of the stimulus bill. Read the complete stimulus bill here, and you’ll be a step ahead of many of the congressmen who didn’t have a chance to read it before voting.
Updated March 21, 2011 and originally published January 26, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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Saxman,
I am sorry for jumping you, I know what you mean by you cant post emotion so its sometimes taken wrong (like I did, lol)
Thank you as well for clearing it up.
As bad as it sounds, I know people like you mentioned in your post, those who would rather sit on their buts at the welfare office than try and get a job, now im not talking about those people who have a real need to use welfare over a job (like those that are disabled and cent hold one, or are the caregiver to children or another family member who needs it. I understand what its like not to be able to work because you cant afford to pay someone to care for them, even if you were working.)
My cousin is one of those people who uses welfare to pay for groceries so she can use her income for drugs.
When I was talking about those people who own their own company and dont know how to manage it….. I was talking about my father. We had an income of 700,000 a year when I was growing up. when his partner was audited and got in big trouble, the company tanked. Now that wasnt my fathers fault, but what we had in savings wasnt enough to pay his taxes for the last three years. He didnt pay them, and im not sure why….but he had to take a job at a company 1000 miles away for 90,000 a year. at the time i thought oh crap this sucks , were broke!
Im 23 years old and a mother to two great little girls. Wasnt planned that way, but it happened. My husband made 26,000 last year as manager of 7-11, and he does work for his uncles A/C company as well. about 6 months ago he got a raise that resulted in 20 extra dollars a month after taxes. We were kicked off foodstamps and my childrens medicaid. our income might show we are not low class, but when after we pay rent (not in an expensive apartment either, we are actually in the government regulated ones, we are still under that income limit, thank god) of 750 amonth and pay for our car and insurance, and pay our electricity and internet bill we have about 300 a month left for groceries, diapers for our youngest and gas for the car.
I look at our income and think, oh crap were broke! lol but at least I know whats going on and can keep my kids happy.
I look at all of our friends and see that they are single or married with no kids, they live in the high class apartments and take vacations to taiwan every 6 months to visit a friend, and I think we are so screwed, nothing is in our control and i have no idea what im doing, but there was a comment on here that said they think i have it under control and that feels so nice to hear.
OK – Is it just me or what?
The Government is giving us back some of the money they collected. So, take from the rich and give to the poor, Right?
Does that not just seem so fundamentality wrong in a capitalist system?
I own my own business and I work 15 hours a day to make a living and PAY my taxes!
What is it with all of the poor folks bashing? Go to the library and learn something; grow things and sell them; stop whining? You are all becoming a country divided! And those of you who say you’re living the sweet life; well get the heck off of here. Until you lose your job, can’t pay for heat or food or medical care for yourself or kids then you don’t know “richard” and should just shut up.
$500 for us? After the trillions of our dollars that have been spent on the war, the billions in cash that were lost in a shipment to Iraq and never found; the almost trillion of tax money that was GIVEN to the banks and companies to spend on million dollar bonuses and private jets!!??
Get real and give us something that will really stimulate our lives and the economy! I agree with “bluelight422″, his post should be sent to the Obama and his cabinet, the house and the senate. It might need some refinements but it’s about as sound and sensible as the crap that’s coming out of Washington today.
If they really care then passing something like this will be easy for them. This country is in so much debt, but we the citizens are in more serious debt; we won’t have shelter or food or access to medical care, the leaders will not suffer one single second.
Come on people! Stop the stupid bickering; you sound like the republicans and the democrats. Get some sense of reality and even if you are not in the same sad financial boat as the millions of laid off people, sick people, or senior citizens, try to imagine what it would be like to not be able to pay for heat, or food, or rent? Not to even have money for public transport to anywhere. Not everyone is in such dire straights but so many are and it’s up to the rest of America to help not make convoluted suggestions because you’re warm, your belly is full and you have your creature comforts. Think of the others who are suffering and offer some sound advice and throw your platitudes in the trash!
I agree that pray is helpful if you’re a religious person but God isn’t going to send us food or money or whatever we need, we have to do that for ourselves.
Amen, I’m finished.
by the way guys it’s now down to $400.00 a year for singles and $800.00a year for married couples. The money get lower and lower for us. What is going on here. What the hell are we going to do with $400.00 tax credit. At least give it to us as a check so we can spend it, or put food on the table or pay a dam bill.
After all of the talk and blogs all over the internet I have to ask if anyone of you out there knows of any way that we can get our thoughts and feelings to the attention of the lawmakers?
What recourse do we, the main street citizens, have in this whole thing? Do we have a voice? Who will listen to us? Where do we express ourselves to be heard and will our voice make any difference?
We the tax payors whose money they keep talking about have no control over any of this; we can only listen in silence as the news shows bring us the latest upset made by the lawmakers in Washington. We cannot tell “them” what to do with “our” tax money because they aren’t asking our permission and once we pay it to the government it ceases to belong to us.
Can we demand a presence in the proceedings? Can we demand a voice in the decision making process? Do we have the right to offer our suggetions and ask that they be seriously considered? Or do we just sit in silence and let them decide for us?
We did that in December when the Bush Administration offered the first bail out only to learn that the money did not have oversight and our money was spent on big bonuses, private jets, big ticket seminars, etc. The banks and companies that received our money don’t even have to pay it back. They aren’t helping anyone with foreclosures, or offering better terms on mortgages for folks who lost their jobs. We are at their mercy and while Obama and his staff are telling us they are trying it really isn’t about us on main street, it’s about the folks at the top.
Pretty soon there won’t be any main street or people on it, most of us will be in the cardboard shanties reminiscent of the 1st great depression.
Thanks ex-President Bush. We are all so happy that you have a nice ranch to retire to and secret service at our expense to keep you safe. Thank goodness you were rich to begin with and that your oil investments stayed so sound and high all of these years so you could enjoy the comforts that you deserve on our sweat and blood. May the Good Lord see that you receive everything that you so justly deserve.
We will survive, it won’t be easy or pleasant but we are a country of survivors so we will prevail. I only hope the Chinese and our other debtors don’t call in our loans!
Look, I have debt. Lot’s of debt. While I’d like to think I’m responsible for said debt, it disgusts me to no end to know that while I try to dig myself out of this crushing debt, our top executives are getting their shares of the pork pie, bonuses are STILL being paid out regardless of company failures and the icing on the cake: $300 million so congress can buy a bunch of golf carts.
The government takes money out of all of our paychecks, it’s about time we all say enough is enough
Amen, you are the first person on here that knows what they are talking about
I do so love to see articles like this one; all complaint and no better way offered. If you, the author, are so capable of determining what’s wrong, why is it you never offer alternative solutions? And cut the crap about there not being space or time. You had space and time to discern what’s wrong, brother you have space and time to offer your solution you just know will work.
People who complain and offer no help are simply bitching … pure and simple. So put your money where your mouth is and publish your real world, workable solutions. But be careful, for every real world, workable solution there is an “expert” to tell you how wrong you are. That’s the nature of economics. So do your research, compile your data, test your hypotheses, publish your results and ask for confirmations and retesting. You do that and you’ll have real credibility. If not, you’re just one more sour individual all to ready to complain, but never available to jump into the fight and take a blow or two.
God help us. The American people need help, not all the millionare bank execs. Why should we bail out banks that fail? Will the government bail us out when we are unemployeed and have lost our home?
Will a little 500 dollar check really do us any good long term? What the hell is wrong with this picture?
Retirement accounts have lost over 30% of their value in the past year. Many retirees (like me) have to work to make ends meet. Yet retirees who receive Social Security benefits continue to be (double ) taxed on their benefits: first, when they paid into the SS system, and now when the benefits are received. Also, even though retired, I still have to pay into the SS system from my earnings. If the Congress is truly concerned about double taxation and about providing relief to hard working Americans, the tax on SS benefits should be abolished, and SS tax on retirees’ earnings should also be abolished.
The people who work their a$$ off get less than the ones who sit on their a$$….it just ain’t fair is it? I say, quit work, sit on your front porch and love life. The government will take care of you..
So now that Obama is signing this Stimulus bill…the only thing I’m not hearing is when will it all take effect? When wil the unemployment be extended? When will peoples Foodstamps go (i believe 12%) higher? I feel it all starts with the poor. They will spend the money.
Sorry, the stimulus is not going to work. Like some of the commenters already mentioned, they’re just going to pay down debt or hoard the money until better times. According to the CBO, economic growth will be lower long-term than if the government just left things alone. It’s time to welcome back stagflation.
Instead of worrying about someone else’s corporate jet, how about we worry about the gigantic hole the government is dumping our taxdollars down?
I liked the big check we got last year. I don’t understand any of this and what it’s going to do to help pay off debt. Me.. I only pay off debt when I have a big amount and my power, rent and everything else is paid. So 30 dollars a week is just going to seem like normal pay to me which will just go to gas power rent things like that bc not seeing it in a big chunk I won’t even think about it being there. Which it doesn’t matter what we think one bit.
Not understanding is what they count on from all of us …. they want you to just take it and spend it and raise the economy that month …. then in a few mths the spending stops again and we get to hear recession once more .
A lil bit every week just makes the hike in everythings cost a lil more barable .
Its a stimulated recession ….
I’ll take this refund to get out of TN and back to FL this place stinks!
I am working 5 jobs. My spouse was forced out of work at ATK because of a medical disablilty. We owe $21000.00 in taxes, because of having to use our retirement fund and Met Life not takiing any taxes out of his checks. I am trying my hardest, paying my bills, alot of it has gone to collection agencies, so trying to keep up is just about taking me out. I do not want to take out Bankruptcy, that is not my way out. I have 3 children and 1 grandchild. Is there anyone or anything out there that could help me in my case. I am not asking for a handout, I just have such anxiety of having to have our families help us, when they can’t really afford it either. I work at a hospital, for an ambulance, Teach EMT classes and also have 2 State jobs, one is the State Pediatric Force Team, the other is State Test team for new EMT’s.
My stress level is pretty high, I just some help, somehow, somewhere. Can anyone help?
Thank you for any help you have for me, advice is the greatest assett from people who have beeen in my shoes/
Sincerely
Christie
email at chp@wildblue.net
Should I take out what little bit of money I got left in stock for my retirement or leave it in there and lose the rest of it? I am scared. Already lost more than half of what I had saved for retirement.
How will the reduction in withholdings affect my 2009 tax return? In the past if I did not have enough withheld I had to pay the government. Now that the reduction in with holdings is giving me extra in my pay check won’t I be paying it to the government next April?
Is it just a reduction in withholding? I was under the impression it is a genuine reduction in taxes due. There’s quite a bit of difference.
Thanks to my dad who found the following:
The IRS website explains in news article IR-2009-13 New Withholding Tables Now Available on IRS.gov; Most Workers Will See Bigger Paychecks this Spring
in the 7th paragraph: “…all eligible taxpayers will need to claim the credit when they file their 2009 income tax return…”
http://www.irs.gov/newsroom/article/0,,id=204521,00.html
theres a major difference !!
If my 2009 wages, deductions, and exemptions all remain the same with the exception of the new federal tax table, how will the bottom line of my 2009 tax return that will be filed in 2010 be different than the one I just filed for 2008?
It’s too early to say considering there is much more time left for the government to change the laws for 2009 income tax returns.
You will owe what you’ve been “given” in 2009 with the reduced tax table. But if they do change the laws before filing the 2009 tax you may break even. You can change your withholdings to cover the “extra” now even if you claim zero. If they do change the laws you’ll get it back. I doubt they will change the laws.
Quit giving the American people a ” lil doggie treat ” , and get things in real check . Spend this money on a useful change .
Take all your money used to assist other countries and assist the people here . freeze the credit card interest rates at a low level giving people a chance to catch up and reduce the principal debt owed .
Help the people that rent due to minor credit issues be able to purchase a home with low interest for the early years of the mortgage where if they are motivated to move forward they will put everything they can toward the principal early on .
That will create a stimulus …. homeowners by things for their homes .
People need a round about stimulus not just some play money … that ends up in big biz pockets and just makes a fake stock market jump for a few companies that will drop out again after that play moneys gone everyones stock drops again and we are again in a self afflicted recession …..stimulated recession ….is anyone seeing what this is ? I wont go any further .
afterthought……
And for the peole that arent in debt or dont want a lowered mortgage starting rate , the ones that were wise from the start (which I am not one) Give them the cash stimulus …. they deserve it and they have earned the benefit of having the cash gift … why ? because they will use it wisely …..
Just give us back our interest and finance charges on all loans and credit cards. Not just mortgage interest. When we were able to write off interest and finance charges the economy was good. People will start buying, which will create more jobs, etc. It was unfair to take that write off away from us. The economy has gone down hill ever since.
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