by JERRY COON
All 1,071 pages of the Economic Recovery Bill were signed by President Obama on Tuesday. This bill has some items that will benefit most of us, although you can bet there isn’t anything in it for the presidents of GM, Chrysler or Ford. The total bill is worth $787 billion in federal spending. Since the deficit was expected to be about $813 billion anyway, that will bring the federal deficit for this year up to $1.6 trillion. That is a staggering amount of money. We have become somewhat acclimated to the big number game, so the figures don’t seem to mean as much.
This “big number game” appears in our day-to-day life in many ways. For example, in major league baseball, Ryan Howard of the Philadelphia Phillies recently signed a three-year contract for $54 million. Wow – $54 million to hit a baseball. The New York Yankees signed three players, CC Sabathia, AJ Burnet, and Mark Teixeira, to free-agent contracts that totaled $441 million. Wow – $441 million to pitch a baseball and, in Teixeira’s case, to play first base. It seems that every day we see another story of a Wall Street executive that received a multi-million-dollar bonus or remodeled his office for a few hundred thousand dollars. Those numbers don’t just jibe with the reality of living out here in Rockford and in all of the Rockford-like cities of the United States.
It looks like the politicians that we have elected have lost touch with us, and that’s a scary proposition. I am not saying that some stimulating should not take place. Our economy needs some help, and some type of stimulus bill is good. I am saying the men and women in Washington are so used to playing the big number game, that billions and trillions do not have a relation to reality anymore. A one-year deficit of $1.6 trillion? That’s an outrageous figure. But outrageous as it may be, it is what it is, and the Economic Recovery Bill is what it is and there is something in it for most people.
For starters, all 4.8 million people drawing unemployment will receive a $25-per-week benefit increase. In addition, the first $2,400 of benefits received in 2009 will be tax-free.
Next, taxpayers with children in college will get some added assistance. The tuition tax credit will be increased to $2,500 and up to $1,000 of the credit will be refundable. Currently, the maximum credit is $2,000 and none of it is refundable.
In addition, the Pell Grant program will be expanded by about 800,000 students. For the seven million eligible students, each student will receive up to $5,350. Pell Grants are supposed to pay three-quarters of the average tuition to a public four-year college.
First-time homebuyers will be eligible to receive up to $8,000 in a refundable credit. There is a current $7,500 refundable credit in effect. The difference is that the new $8,000 credit will not have to be re-paid to the federal government, while the $7,500 does have to be re-paid at the rate of $500 per year.
For taxpayers buying a new car, the sales tax is going to be deductible against taxable income. Currently, sales tax is deductible only for taxpayers who itemize. It appears that this new deduction will be deductible even for non-itemizers.
Taxpayers who buy energy efficient windows, furnaces, and air conditioners will be eligible for a 30 percent credit up to $1,500 to help with the cost of the purchase. There are more energy provisions in the bill, but most of them apply to buying products, such as wind turbines or plug-in hybrids, that just do not apply to us at this time either because the product is not even available or there is not a commercially viable product at this time.
There will be an additional $1,000 child tax credit for taxpayers with three or more children and the earned income tax credit will be expanded.
Finally, the tax tables are being re-written, probably even as you read this, to give all single employees, starting in June, a take-home pay increase of approximately $13 per week. Couples will receive a $26 pay increase. In order to fully stimulate the economy, the $13 or $26 is expected to be spent and not saved. I am sure that most of us will do our part and spend that extra amount.
Since I like to eat hot dogs and drink beer at The Corner Bar and buy coffee at Herman’s Boy, I will be doing my part to stimulate the economy.
This is Jerry Coon signing off. I have to contemplate a little on just how large a figure $1.6 trillion really is.
Jerry Coon is an Enrolled Agent.
He owns Action Tax Service on Northland Dr in Rockford.
His email address is firstname.lastname@example.org