Tax Rebates and Stimuli

In a rare show of bi-partisan glad-handing, the House and President Bush have agreed on a so-called economic stimulus package that consists largely of "tax rebates" to be given to individuals earning < $75K per year and couples making < $150K.

From this perspective the plan could be called a tax cut and therefore be considered a good thing.  However, the NY Times says that "the stipend of at least $300 would be paid to all workers receiving a paycheck, even those who did not earn enough to pay taxes last year." 

So yes, it’s a tax cut for most of the middle class, but also a giveaway – there’s no other word for it – for those who are either in need or who did nothing to earn the money, depending on your perspective. 

John Aravois says the plan is geared towards redistributing wealth without helping the middle class:

That’s because far too often the Democrats don’t give a damn about anybody who isn’t a minority or starving to death (both valid causes to be sure, but are they the ONLY causes out there?). If you’re in the middle, you’re on your own.

And don’t think this is only about a stupid $300. It’s about health care. It’s about education. It’s about every single issue you care about. The powers that be simply aren’t in this to help people in the middle. The Republicans want to help the big pharmaceuticals and the big business hospitals, while the Democrats want to help uninsured poor people and kids. And while all of that’s nice, what are the rest of us supposed to do when our premiums hit $2000 a month and, God forbid, something catastrophic hits us?

I have to wonder, though, exactly who John considers the middle class to be.  Virtually everyone would consider a family making $150K a year to be well off, so I’m not sure the characterization of this plan failing to help the middle class is accurate.  In the bigger picture his question is a good one; in this case I’m not convinced it’s relevant.

That said, whether so much wealth – my back-of-the-envelope numbers says it’s at least a $40B/year payout – should be redistributed to the middle and lower classes is another question, particularly at a time when the federal budget is in the red to the tune of $300B/year.

2008 is an election year, however, and everyone whose seat is up has to prove their generosity to the folks at home, whether it makes fiscal sense to do so or not.  I can name that tune in 3 notes, how ’bout you?  Although my family will benefit significantly from this plan should it pass, frankly the familiar melody is a bit flat now.  Where is the fiscal responsibility in government?

Indeed, this is the sort of legislation that makes Fred Thompson’s disappointing results in the early primaries a tragedy – he was the only candidate from either party with a reasonable grasp of economic fundamentals.

Of the rest, Mike Huckabee’s Fair Tax plan should be given its due as, if nothing else, a mechanism for introducing transparency into the government’s "revenue collection" process.  The IRS code is currently unfathomable for most Americans because of its incredible complexity.  It doesn’t have to be that way.

Some have complained that Huckabee’s tax is too light on higher wage earners.  Although I am not one of the wealthy, I don’t see that as a problem.  Others have said that the tax rate would have to be astronomical by U.S. terms – 30% or higher – to be revenue neutral compared to the current system.

(Comments, anyone?  I have not run these numbers…)

What of it?  If that’s how much money the government is collecting from us and spending on their giveaways, wouldn’t it be better for every American to know that up front?  Then we can feel the pain of our tax burden constantly rather than walking around in the dark all year while hoping to win the 3 Card Monte game on April 15th.