"I would send it to help my adopted children in Haiti." Richard Ham, consultant, Carson City
WASHINGTON - If you get a pay envelope, Uncle Sam's about to put a little something extra in it. And he wants you to go out and spend, spend, spend.
Starting around May, most taxpayers can expect a $600-$1,200 rebate from the federal government under a deal announced Thursday by congressional leaders and President Bush.
The deal came together with unprecedented speed as Congress and the White House moved to begin rushing the tax rebates to most tax filers by spring, hoping they will spend the money just as quickly and jolt the ailing economy to life.
Rebates would be even higher for families with children.
The one-time tax rebates are at the center of a hard-won agreement to pump about $150 billion into the economy this year and perhaps stave off the first recession since 2001. House Speaker Nancy Pelosi, Republican leader John Boehner and Treasury Secretary Henry Paulson worked out the details in negotiations that stretched into Wednesday night at the Capitol.
Approval by the Senate is needed, too, but pressure is strong for quick action by all concerned.
About two-thirds of the tax relief would go out in rebate checks to 117 million families beginning in May. Businesses would get $50 billion in incentives to invest in new plants and equipment.
Individual taxpayers would get up to $600 in rebates, working couples $1,200 and those with children an additional $300 per child under the agreement. In a key concession to Democrats, 35 million families who make at least $3,000 but don't pay taxes would get $300 rebates.
The rebates would phase out gradually for individuals whose adjusted gross income exceeds $75,000 and for couples with incomes above $150,000. Contributions to IRA and 401(k) retirement accounts and health savings accounts would not count toward the income limit.
"This package will lead to higher consumer spending and increased business investment," Bush said in hailing the agreement.
The bill will go straight to the House floor next week and on to the Senate, where some Democrats hope to add elements such as extending unemployment benefits for workers whose benefits have run out.
Indeed, many Democrats, such as Ways and Means Committee Chairman Charles Rangel, D-N.Y., and Edward Kennedy of Massachusetts, the liberal lion of the Senate, were deeply unhappy that Pelosi agreed to jettison that proposal in late-stage talks, as well as plans to increase food stamp payments.
"I do not understand, and cannot accept, the resistance of President Bush and Republican leaders to including an extension of unemployment benefits for those who are without work through no fault of their own," Rangel said.
The administration signaled it's unlikely to welcome efforts to broaden the measure, and pressure was mounting in the Senate to accept the hard-won deal.
"The American people are not going to have a lot of patience for taking time," Paulson said.
If the Senate gives quick approval, the first rebate payments could begin going out in May and most people could have them by July, he said.
Majority Leader Harry Reid, D-Nev., said the goal is to send the package to the White House by Feb. 15 for Bush's signature, but he noted the Senate was likely to try to add more spending.
Bush had supported larger rebates of $800-$1,600, but his plan would have left out 30 million working households of people who earn paychecks but don't make enough to pay income tax, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center. An additional 19 million households would receive only partial rebates under Bush's initial proposal.
To address the mortgage crisis, the package raises the limit on Federal Housing Administration loans from $362,790 to as high as $729,750 in expensive areas, allowing more subprime mortgage holders to refinance into federally insured loans. To widen the availability of mortgages across the country, it also provides a one-year boost to the cap on loans that Fannie Mae and Freddie Mac can buy, from $417,000 up to $729,750 in high-cost markets.
What would you do with the proposed tax rebate?
"I would send it to help my adopted children in Haiti."
Richard Ham,
consultant,
Carson City
"Pay bills and put it in the bank."
Richard Moore, retired,
Carson City
"Pay off credit or save it, but not really spend it. I'd better pay off the credit cards."
Linda Gallo,
bookkeeper,
Carson City
"... I'll put it into savings. I won't put it back into the economy. I need the cushion."
Colleen Patterson, United Blood
Service donor
representative, Carson City