Please, please, please – no more tax rebate checks like those sent out during Bush’s first year in office. They cost the IRS a fortune and resulted in mucho confusion and tons of errors on 2001 tax returns.
There have got to be better ways of getting money quickly into the hands of taxpayers.
Here’s an idea. Why not a “payroll tax holiday”? This concept was proposed a few years ago, but never acted upon. Here is how it could work –
Beginning with March 1st of 2008, the first $4,850 of wages earned by an employee over the age of 17 (or 18) would be exempt from at least the employee share of the 6.2% Social Security tax. This comes out to $300.70 per person. Over a period of time, in many cases one month or less, an employee would receive a total of $300.70 more in his/her paycheck. FYI The 2001 rebates were $300.00 per person.
Workers who earn more than the $102,000 Social Security earning threshold during calendar year 2008 will eventually pay the maximum Social Security tax – so they would in effect pay back the advance by the end of the year.
A special code for Box 12 of the 2008 Form W-2 would identify the amount of the payroll tax holiday savings, so this advance could be “paid back”, if Congress so desires, on the 2008 tax return in the form of a reduction of federal income taxes withheld.
Congress could also provide a payroll tax holiday on the employer’s share as well to put extra money in the hands of businesses. Or it could limit the employer payroll tax holiday to businesses with less than $X dollars of gross receipts in 2007, or with less than X number of employees, to direct the extra cash to only small businesses.
This is just a quick alternative suggestion off the top of my head – but it shows that there is more than one way to do it.
While I realize that I may be asking too much, what I would want Congress to do if they want to enact some kind of immediate rebate distribution is to put some serious thought into finding a way to do so that would generate the least amount of cost to the IRS, create the least amount of confusion, and reduce the potential for FUs on the 2008 Form 1040 or 1040A. Don’t just do the quickest and simplest thing and mail out checks now and damn the consequences.
Congress responding and not reacting – what a concept!