Some rich folks can get stimulus tax rebate while those with far less can't
I'd like to rename the Economic Stimulus Act of 2008 the Law of Unintended Consequences.
That came to mind the other day when I read a reader's question. He and his wife received at least $3,000 in Social Security benefits last year, enough to qualify them for an economic stimulus rebate. But, he wanted to know, if they made more than $150,000 in tax-free bond interest in 2007, would that disqualify them?
The answer, shockingly, is no. They can get the rebate.
The law says you have to have at least $3,000 in earned income and/or certain benefits like Social Security to qualify for the basic rebate. When a couple's earned income reaches $150,000, the basic rebate begins to shrink, and at $174,000 in adjusted gross income, the rebate phases out completely. So many upper-middle class people, by Congress's definition, get left out.
However, tax-free bond interest isn't considered earned income. It's not figured into adjusted gross income, either. So, no matter how high that tax-free income is, it doesn't disqualify someone from getting the rebate. Further questioning determined that my reader and his wife had other income besides Social Security last year, so they could be eligible for a rebate of up to $1,200.
Contrast that with a query I got today from another reader, a single mother of two whose only income is child support. She's not eligible for the basic rebate of up to $600 for single filers and heads of household because child support is not considered earned income. And because she can't get the basic rebate, she also is ineligible for the $300-per-child rebate that's provided for by the law.
The Economic Stimulus Act of 2008 was billed as an aid to the working middle class. The solons who crafted it were criticized for leaving out the very poorest people, who didn't make enough earned income to qualify. With this twist, we learn that not only were the poorest left out, but some very rich people still can benefit. Is this really what Congress had in mind?
--Tobie Stanger
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Posted by: Jim | Mar 10, 2008 8:08:01 PM
The single mother isn't completely left out. If she earns money this year she can claim the rebate on her 2008 taxes. I assume she's also missing out on the earned income tax credit, so that's another incentive to find a job.
Bonds are tax-free so that governments can borrow cheaply, and the owners pay their tax in lower interest. I'm sure your retired couple has paid plenty of taxes, so why begrudge them the rebate now that they're on a fixed income.
The only thing unfair here would be if the fathers paying child support didn't get the per-child credits.
Posted by: Alan DeFlori | Mar 11, 2008 6:25:21 AM
It still blows me away that there are still people out there like Tobie S. that somehow believe the "tax rebate" should be a welfare give away that is meant to be an additional handout for the poor. A tax rebate is just that. A refund of taxes paid. If you don't pay income tax, by defination, should not get the rebate. Our government has already pushed the limits of elegability by "giving" it to people who have not paid any where near the amount they will be getting, so why should it extend to people that are already living on the handouts from others, including the mother getting child support that pays no income tax? Otherwise let's just take all the money being rebated and call it a "special one-time welfare payment to only those who really need it".
Posted by: Dave Johansen | Mar 11, 2008 11:18:23 AM
I'm confused as to why Tobie believes that someone who didn't pay any taxes is supposed to be receiving a tax rebate.
Posted by: Tobie Stanger (Consumer Reports) | Mar 11, 2008 5:14:52 PM
Congress is giving stimulus payments (i.e. rebates) to LOTS of people who don't pay federal taxes.
More than 20 million people--namely, recipients of Social Security, Veterans Administration and Railroad Retirement benefits--are eligible for rebates even if they don't pay federal taxes or file returns. Check out this page on the IRS Web site:
http://www.irs.gov/newsroom/article/0,,id=179949,00.html
This law, like all laws, is an amalgam of political decisions. It is not based solely on the principle that only those who pay should benefit.
Posted by: willailla | Apr 3, 2008 3:44:41 PM
Someday people like Alan may find themselves in dire straits, then I think they'll develop a sense of compassion. Isn't it a damn shame that handicapped people on SSI should receive 'handouts?' Why these deadbeats ought to be able to live on $637 a month. I'm sure Alan could....and Rush Limbaugh--no doubt his idol.
Posted by: matt | Apr 15, 2008 9:55:35 AM
What if I owe 2200 in back child support? Would I get that 600 dollar check still? They will already take state and federal so would they take what should be to help my family and me???
Posted by: Tobie Stanger (Consumer Reports) | Apr 15, 2008 11:52:34 AM
Your rebate check would be treated the same as your federal refund with regard to back child support. So yes, it probably will be garnished.
Posted by: jcb | May 6, 2008 9:15:35 PM
I just want to say that those with higher incomes are the ones who are recieving the largest rebates. My husband and I made 31,000 last year. Our income was lower than normal due to the fact that I decided to return to school to pursue a degree. In order to be able to do well at my studies and ensure that the children recieved the quality time from me that they deserve, I am not working. We have two children. Due to the low income we are not entitled to the maximum amount. This seems ridiculous to me because we do not recieve any type of assistance and are hard working parents. One person said that people with low income are looking for "welfare give away", that is not true. Some of us do work hard and pay taxes just like everyone else. If my husband and I would have made 150,000 this year, we would have recieved the maximum rebate. Is this fair? We work just as hard and pay every type of tax there is (property tax, school tax, sales tax, state income tax).
My point of this whole post is..... Before you accuse those with less income of looking for a "welfare give away" think about what you are saying. Some do not recieve a penny of assistance and live with a less substantial income. We work hard to provide for our children and live within our means! Why shouldn't we be able to get the same amount as those who are wealthy? Who needs it more?
Posted by: Tara | May 12, 2008 12:04:36 PM
I didn't get the stimulus check, my divorce was completed in Oct. so I had to file single. I didn't work much last year so I didn't make the minimum amount. My tax accountant told me I would, and 2 days ago informed me I won't. I really could've used that extra $600. I work part/full time and I'm struggling to make ends meet and keep my son happy and healthy. I've always filed joint and because of the divorce at the end of the year, my son and I got left out.
Posted by: Elaine | May 17, 2008 8:08:39 AM
I think it is a crock of bull for people with SSI and they can only make 85 extra dollars a month abd still be eligible for their SSI, but they don't qualify for the stimulus tax, where is the help for the poor people?
Posted by: Alicia | Jan 18, 2009 1:52:38 PM
Whats trips me is...This REBATE was an advance on our taxes for this year. My question is. All those who received the 300 dollar benefit for not working for them its FREE MONEY! What do they have to "advance it on?" I was ripped because I had thought Bush was signing this as a way to get us spending and that it was a REBATE. Rebates usually dont get paid back. I checked out the IRS website and yup..Off my taxes but not for those who don't file any but still enjoyed the money