Sunday, January 20, 2008
Families of four earning less than $24,900 a year would not get a rebate under the White House plan.
WASHINGTON (AP) — The poor are the people most likely to spend a tax rebate, if they are handed one in an economic revival plan. Whether that happens depends on who prevails — the White House or the Democrats who run Congress.
Democrats want to make sure rebates get to more of the poor, including those who have jobs but earn too little to pay income taxes.
The idea is the more that people spend, the more it will energize an economy threatening to slide into a recession for the first time since 2001. According to many economists, the lower that people are on the income ladder, the more probable it is that they will spend a rebate and spend it quickly — just the shot for the ailing economy. These people are more likely to be living from one paycheck to the next, without other assets to draw on.
“There’s a risk of a downturn” in the economy, President Bush said Saturday in his weekly radio address. “Congress and my administration need to work together to enact an economic growth package as soon as possible,” he said.
The White House, for now, envisions providing one-time rebate checks to people who pay federal income taxes. That would leave out millions of the working poor, who do not make enough to pay income taxes but do pay Social Security and Medicare payroll taxes.
Families of four earning less than $24,900 a year would not get a rebate under the White House approach, said Chad Stone, chief economist at the Center on Budget and Policy Priorities, a research group that focuses on how government programs affect the poor and middle class.
Stone estimates that about 22 million households file income tax returns but do not pay that tax because their earnings are so low. An additional 22 million households do not file a return, he said. This group includes many older people on fixed incomes, he said.
Bush is not saying how much the rebate could run. Congressional aides say the White House is considering up to $800 for individuals and $1,600 for married couples.
Two-thirds of those who received rebates in 2001 spent the money in the first six months, studies have indicated.
Democratic leaders are considering a $500 rebate for individuals, according to aides involved in the talks. Details for couples and people with children are being negotiated.
Democrats also are looking at ways to make sure more of the poor get the rebates. To this end, the rebates could be limited to individuals with incomes of $85,000 or less and couples with incomes of $110,000 or less, said congressional aides.