Is There a Economic Stimulus Coming on Your Paycheck?

Check out this article over on CNN Money. Details are still a little unclear, but it looks as though Obama is planning a tax cut for the first half of the year. It will supposedly decrease your taxes by around $83 to $166 per paycheck.

This credit, dubbed the “Make Work Pay Credit”, could help get more money into the hands of consumers, thus increasing spending. The credit would essentially work as a payroll tax credit equal to $500 a year for individuals and $1,000 for couples. The money would be available before you file your taxes. This is due to the fact that your employers will just withhold less from your paycheck. Since Obama planned this credit for the middle class, it begins to be phased out for individuals making $75,000 or more ($150,000 for couples).

In my opinion, this isĀ  good thing. However, I’m not real sure if it is being executed properly. I think that if taxpayers were to receive this credit in a lump sum they would be more likely to spend it. If they just get a few more dollars on their paycheck each week, they will be more likely to not notice the increase in pay.

How would you like to receive you money, lump sum or on each paycheck?

5 thoughts on “Is There a Economic Stimulus Coming on Your Paycheck?

  1. Bruce

    I disagree, I don’t believe consumers would go and spend the lump sum idea again.
    I say “again” because some 88% reportedly spent the last one instead of saving it.
    I think, as this economy continues to fall, more are going to hoard what they can get their hands on.

    As for this new idea, well it sounds good but I don’t see it as realistic.

  2. Yana

    I like any idea that increases our bottom line. I do think bigger paychecks will generally mean more spending by the masses, since many people spend whatever they make. The problem is the cost of living. I don’t know if it makes any positive difference for people to feed the economy by paying higher utility bills rather than buying what they don’t need and don’t have to pay for.

    Also, how much good does it do to give a tax break under today’s employment conditions? For example, my husband’s pay has hugely decreased due to losing workdays. He works 3 days a week now, max, instead of 5. He doesn’t get holiday pay or certain benefits because he doesn’t work enough hours to qualify. Prior to these cuts, he worked holidays out of preference and got well-paid to do so.

    We want to be comfortable and financially secure. If employment is the hardest way to achieve this, we won’t be spending a nickel more than we have to. Which is, of course, an excellent road to stimulating our own economy regardless of what’s going on in society.

  3. Funny about Money

    Naturally, I’d like to see a plumper paycheck. As Yana points out, though, I’d far rather feel confident that I’ll be seeing ANY paycheck…and not be beat up for the privilege. Like many people, I’m cutting back on spending in anticipation of threatened unemployment, so any such increase would just go straight into savings.

    You know, given that the federal government is sinking trillions of dollars into debt and state and local governments are cutting key services (my city is cutting jobs on the police force, for example), I’d rather see that $50 or so be donated to state and municipal entities, support services for the homeless mentally ill, schools, or cultural institutions that desperately need it. Fifty bucks one way or the other isn’t much for me, but if a thousand of us got a tax deduction for having $50 of our federal taxes diverted to the city library or the school down the street, that $50,000 would make a huge difference. And that would make each person’s $50 significant.

  4. Adam Post author

    @Bruce – I do agree with the fact that many would not spend a lump sum as the did with the first one. However, I do think it is more likely that they would if they got it all at once.

    @Yana – Great points! How would people receive their credit if the are unemployed? Those are the people that need the most help.

  5. Joe

    “If they just get a few more dollars on their paycheck each week, they will be more likely to not notice the increase in pay.”

    I think you could reasonably make the opposite argument; namely, people will be more likely to spend a few extra bucks they don’t notice than a larger lump sum that they DO notice.

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