The Motley Fool Discussion Boards

Previous Page

Personal Finances / Living Below Your Means

URL:  https://boards.fool.com/i-wrote-quotthe-simple-solution-would-have-been-15157585.aspx

Subject:  Re: Not everyone gets a tax rebate Date:  6/12/2001  3:47 PM
Author:  synchronicity Number:  153111 of 910561

I wrote:
"The simple solution would have been to put in the 10% bracket on the first 6K (for single, non-HoH) or 12K (for married) taxable income, have companies adjust wage withholding (starting 7/1 or whenever) to reflect this, and simply have many of us get a refund when we filed our 2001 taxes. Unfortunately, for political reasons the decision was made to issue these "rebate checks".

and Benevolent replied:

That's a simple solution from an economic side, and academics probably back that scenario en masse. But from a practical side, changing withholding would benefit no one but accountants.

Changing withholding would add unneeded expense and complexity for businesses, because they'd have to go back in the middle of the year and restructure their payroll.


Well, I don't work in payroll, but the change would not add to expense beyond what will already ahve to occur. Companies have to change their tax withholding calculations at the beginning of every year anyway, when the wage brackets are adjusted for inflation. Also, the tax brackets at 28% and up are being reduced effective 7/1 by 1% (this will work in practice by having a "27.5% bracket" when filing 2001 tax returns, as half the year will have been at 28%, and the other half at 27%. Same for the 31, 36, and 39.6% brackets). This will necessitate a change in withholding on all wages paid after June 30, 2001 (see http://ftp.fedworld.gov/pub/irs-pdf/p15t.pdf for all the details). So there is no practical reason why the 10% could not have been accomplished through withholding.

The reasons advanced for the "checks" are essentially either economic ("we need to get these funds into Americans' hands as quickly as possible to help the economy") or political (or a little of both), depending upon one's point of view.

One last note: the checks are for "up to" $300 and $600, and as stated are based on 2000 liabilities. There will be ways for people who don't qualify based on 2000 data but do when they file their 2001 return to claim the credit at that time. See http://www.irs.ustreas.gov/ind_info/apinfo/index.html for more info.

Hope the above is useful,

-synchronicity
Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us