We’ve heard enough about bank bailout and auto bailouts. We’re all wondering: what about us? When do we get bailed out?
Well the answer is that we do get a bailout–Hey, it’s not so much, but it’s better than nothing and even better than last year. We all know that Obama has promised repeatedly to lower taxes for 90% of the population. Hey, he’s actually done it and, since he didn’t repeal Bush’s tax cuts for the rich, actually more like 97% of the population will be getting some relief in the form of lower taxes.
Here’s an easy way to see who gets what. It’s from CNN Money, my new favorite place to find info.
Roughly 97% of American households could see tax savings as a result of the American Recovery and Reinvestment Act, according to a new analysis by a nonpartisan research group.
The Tax Policy Center crunched the numbers and concluded that the average savings would be $1,179. But how much a household actually gets depends on income, marital status and whether a filer has children. The savings range from a few hundred dollars to several thousand.
The law, which President Obama signed, contains a range of tax breaks for individuals. Those likely to affect the greatest number of households are the new Making Work Pay credit worth up to $400 ($800 for joint filers); a patch to protect middle- and upper-middle-income families from having to pay the Alternative Minimum Tax; and expansions of the earned income tax credit and the child tax credit for low-income families.
There are also breaks that address specific situations: a new credit for first-time home buyers, a sales tax deduction for car buyers and a new credit to help pay for college tuition. For people receiving unemployment benefits, the first $2,400 will be tax free.
Obama said the government had already taken action on the broadest of the law’s cuts — the Making Work Pay.
The Treasury Department has told employers to reduce the amount of taxes withheld from paychecks by April 1. Treasury estimates that a typical family will begin taking home about $65 more per month, according to Obama. So, we’re getting the dough in small increments instead of all at once as we did under Bush’s plan. Remember the $300 per person last year? Apparently too many of us spent that paying down debt. The government wants us to spend it and they think giving it in the paycheck will have that effect. Maybe they’re right.
Or, each of us could allocate that small amount to a special savings account and use it to pay off the inordinate amount of debt we all seem to have accumulated. My own view, contrary to Obama’s and his government’s, is that we should all be striving to get rid of debt, especially credit card debt.
“Never before in our history has a tax cut taken effect faster or gone to so many hardworking Americans,” Obama said in his weekly video and radio address.
In addition, the economic recovery plan contains a host of tax breaks for small businesses.
The Tax Policy Center used a representative sampling of all tax filers and non-filers, including information on their income, their spending and their demographics. And then they applied the various tax provisions for which those in the sample pool qualify.
A single person with no children making between $20,000 and $30,000 would see a 12.5% reduction in his or her tax liability for an annual savings of $453. The same person making between $50,000 and $75,000 would see a 4.6% drop, or $626.
At the upper income ranges, someone with income between $100,000 and $200,000 would see a 2.1% drop, which translates into $706.
With or without kids, a married couple filing jointly making between $50,000 and $75,000 could see a 10.5% drop for a savings of $991. Those making between $75,000 and $100,000 would see their tax liability go down 9.1%, or $1,457.
Couples with very high incomes — between $200,000 to $500,000 — could see a 7.5% decline in their tax bill, or $5,645.
Households with children, regardless of the parent’s marital status, would see savings on their tax bill averaging 9.7% of their tax liability, or $1,975.
The first tax credit filers will enjoy is the Making Work Pay credit, which will show up in increments in people’s paychecks starting in April.
In many cases, a household won’t see some of their stimulus savings until they file their 2009 returns, which they can’t do until 2010.
Of course what filers save on their federal taxes under stimulus may be muted by the fact that their cities and states — facing steep budget shortfalls that will be lessened but not eliminated by stimulus funding — may end up raising taxes and fees. This has already happened in California. April 1st we felt the first Big Bite in L.A. County with the New 10% Sales Tax. Ouch! That applies to auto sales as well.