My Thoughts on the Possible Tax Rebate

The other day my husband asked me if I’ve heard the news about a possible tax rebate. I’m usually the one updating him on news, but I did not hear about that one yet. Any talk of a tax rebate makes me drool.

If you haven’t heard about it yet, NPR has a story on it:

Possible Tax Rebate

No one really knows for sure how much the rebate would be or who would qualify. It’s thought that a rebate would help spur the economy because people would go out and spend it. But there are concerns that it wouldn’t help the economy because people would save it.

I guess in a way we aren’t the type of people that they’d want to have the rebate. If it does come, it’s already earmarked to go towards our credit card debt. I briefly thought about buying an LCD TV with it, but that might end up being one more thing we have to move (if we do). We would definitely get the most “bang for our buck” by paying off debt with it.

I’m not an economist, so the only thing I can look at is the impact a tax rebate like that would have on our family. Anything legal that can help us dig out of our debt hole is a good thing. I can’t help but hope that it does happen.

Posted by Tricia on January 20, 2008 at 11:53 PM in General Personal Finance | 18 Comments »
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Kim responded:
Posted: January 21st, 2008 at 5:35 am
I have to agree with you — more bang for the buck to pay on the credit card. If there is a rebate, we plan to add it to our emergency savings account. I did have a few minutes of dreaming of what I could buy though… Luckily, my husband is the voice of reason
mbhunter responded:
Posted: January 21st, 2008 at 6:06 am
Yep, I’m with you. Paying down your debt is a great use of the money.
Bradley responded:
Posted: January 21st, 2008 at 9:00 am
Another vote for straight to credit card debt.
Frugal Dad responded:
Posted: January 21st, 2008 at 9:24 am
I wrote a rather detailed post on my site why I think the rebate plan will fail, economically. From a personal finance perspective, a $1600 family tax rebate would be a nice boost to my debt snowball!
Alison responded:
Posted: January 21st, 2008 at 9:25 am
Even if you use it to pay down credit card debt, you’re still keeping the money moving, which is what economists want. The theory is, if you use it to pay down credit cards, you’ll have that much more credit available, and eventually you’ll make purchases with that available credit (even though we know you, specifically, won’t!). Also, the CC companies will get that money from you to turn around and apply to their company however they see fit (employee raises, new marketing, etc.). The “worst” thing we could do with the money is stick it in our sock drawer and forget about it.
Jim ~ mydebtblog.com responded:
Posted: January 21st, 2008 at 9:56 am
No matter how you look at it, money is meant to be spent. You either already spent it through a credit card, you can save or invest it to spend later, or give it away so someone else spends it. I posted news of this first thing Friday morning when I heard about it. It will be somewhere between $500-1000 per person, so possibly $800 ($1600 married) as long as you meet the requirements. It’s a tax rebate which my understanding is basically the government is giving you your money back and telling you to spend it. I think we should have the right to do anything we want with it. If I want to pay a credit card with it, it helps the economy by helping my personal economy.
DM responded:
Posted: January 21st, 2008 at 10:09 am
This so called “rebate” is a horrible idea. Our country is already buried under a mountain of debt. It’s as if Bush is taking a cash advance from a credit card, to be paid by our grandchildren. What a disgrace.
Dancinghawk responded:
Posted: January 21st, 2008 at 10:12 am
The problem with the ‘take this money and go spend it’ is that it’s indicitive of the sort of mentality that created a lot of our ecconomic problems in the first place — both on a personal scale and a larger social scale. This annoys me so much that if I do get a surprise $800 check in my mailbox, I’m half-minded to donate it to the local homelessness program.

Although in practice, I would probably add it to the debt snowball like a lot of you guys. (Maybe 50/50)
pfmoron responded:
Posted: January 21st, 2008 at 10:56 am
Way to stick to your convictions Dancinghawk.

“I am so personally offended by this administration that in a show of protest I am going to accept their gift and use it for my own personal gain.”

That’ll show ‘em.
Janelle responded:
Posted: January 21st, 2008 at 12:45 pm
Personally I am praying we get the rebates, and the bigger the better. We have earmarked a percentage for our savings account, a percentage for debt and a percentage for vehicle tune-ups. Sorry, no outlandish spending going on here either.
Mike responded:
Posted: January 21st, 2008 at 1:49 pm
I didn’t read the article, but I assume that this “tax rebate” will be the same as the last..basically its “X” amount of your tax refund in advance. Of course, if you really wouldn’t have gotten a refund, it will INCREASE the amount you have to pay the next year…but hey, this is America, we actively discourage such things as “foresight” and such.
SavingDiva responded:
Posted: January 21st, 2008 at 3:40 pm
If the rebate goes through (and I qualify), I would just toss it in my emergency fund. No need for an LCD TV.
Toxic Money responded:
Posted: January 21st, 2008 at 3:43 pm
I wrote about it on my blog, too… I am with you. I’d pay off some debts before I’d go shopping.
20 Something Lady responded:
Posted: January 21st, 2008 at 5:00 pm
I hope that we do get it. We have to pay this year (well every year pretty much) so some money back would be exciting. This could really help my emergency fund goals for the year.
Shana responded:
Posted: January 21st, 2008 at 11:27 pm
While I like the idea of getting $600 or $1k (the amounts I’ve heard mentioned for a single person — I think the amount is double for a couple), I really don’t want rebates to be issued. It’s just a sign of how bad our economy is doing and it’s far too small a bandaid for a economical wound that is enormous.
Jen responded:
Posted: January 22nd, 2008 at 9:55 am
It will be nice to get a check, for whatever amount, and I can use it build up my emergency fund, but overall I think it’s a bad idea. It’s a band-aid on a bigger problem. Plus, as someone else pointed out, depending on your tax situation, you just end up paying it back later on (that’s what happened to me the last time).
Bob responded:
Posted: January 22nd, 2008 at 3:40 pm
EVERYONE LISTEN TO MIKE!!!!!

The last time, they gave out $300. Then they adjusted the tax brackets to increase everyone’s tax due the next spring. Net, all they did was advance you $300 that you had to pay back a few months later.

So be careful with any plan that Congress might pass. You may be required to repay it again, just like last time. “Best” case, you’ll be paying for it through taxes to support interest payments on government debt for the next xxx years (where xxx approaches infinity).

If this is the case, and if you have CC debt, it wouldn’t be a bad thing to use anything received to pay down debt. Add to your snowball, but always be prepared to pay back out. In the meantime, though, you can get those interest payments down a little.

But if they’re doing the same thing as last time, the last thing you want to do is spend any of the money. You’ll owe it back later, whether you realize it or not – in which case they just tricked you into spending money you otherwise wouldn’t have.

I’m highly suspicious that this is what they’re trying to do…. CNN kept carefully wording it as “an advance on next years’ refunds”, not a rebate or handout.
Brian responded:
Posted: February 9th, 2008 at 10:47 am
Don’t be fooled. This isn’t a rebate; it’s a cash advance. From the actual text of the actual bill just apporved by both House and Senate:

“n the case of an eligible individual, there shall be allowed as a credit against the tax imposed by subtitle A for the first taxable year beginning in 2008 … ”

“Credit againat” being the key words there. Don’t take my word for it; read the bill yourself:

http://thomas.loc.gov/cgi-bin/query/F?c110:5:./temp/~c110ETxJw6:e1754: