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The tax rebate from this past fall is a very confusing issue to understand. Since I deal directly with the topic, I hope this explanation simplifies things:

What really happened was that the first $10,000 of income ($20,000 for married) was to be taxed at 10% retroactive to Jan 1, 2001. But, since it was enacted in July, you had already been taxed at 15% on that first income. That is why they owed you $600 back -- the extra 5% you paid already that you no longer owed.

Rather than wait until you filed your tax return to get the refund, congress made a political move to send everyone a check, hoping they would spend it and boost the economy. I think all that did was confuse the issue. Especially for those who end up owing at the end of the year.

Some then ask, why didn't they just modify the tax tables so they took less out from July to December? Well, computer programming for a payroll package is pretty complex. Many still use hard-wired values for the number of tax brackets. While this makes it easy to change the percent and max values, it would require extra programming effort to add the new row. This would be a burden to software companies if they had a short deadline.

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