Economic Stimulus and Taxes

The hot topic of the week is the call by President Bush and others for some type of federal action or actions to help stimulate the economy (AP story and White House fact sheet).

Economists debate whether or not such an action can work and timing is also a consideration - how long will it take for the government to act and for consumers to react?

Some tax considerations:

1. Can we afford more tax breaks? They have to be paid for some way, someday.
2. Not all individuals need to file a return because their income may be below the filing level. How to you get economic stimulus, such as a tax rebate, to them?
3. States likely won't be able to adopt any federal tax cut because they won't be able to afford it. So, if done through a tax break, can it be done in a way that won't complicate state tax return calculations?
4. Should all individuals and businesses get the same benefit - such as $200? Should there be a greater amount for lower income taxpayers? Should higher income taxpayers get anything? What might get them to spend money they have saved?
5. What about some type of hiring and/or asset investment tax credit (refundable) for businesses?
6. Could any rebate be structured such as to perhaps get some people to file who don't, but should? This could also help reduce our tax gap.
7. If people get a rebate,when will they have to pay it back and how? Would it be an early refund of next year's taxes? Paid for through a future tax increase of some type?
8. We still have expensive tax fixes to consider. H.R. 3996 that provided 1-year AMT relief for thousands of individuals (but not all individuals) cost about $50 billion. And lots of expiring tax breaks that would be costly to extend or make permanent. Can these fixes be incorporated into any current relief plans?

The Congressional Budget Office (CBO) has a report on ways to respond to short term economic weakness and some factors to consider in the design of any remedy.

The Joint Economic Committee held a hearing on 1/16/08 on how to avoid a recession. It includes testimony from former Treasury Secretary Summers. Links to a variety of data, such as on unemployment and oil prices is also at this link.

Would some type of benefit truly help the economy?

What do you think?