How Will the Tax Rebate Plan Affect You?

Last week, Congress passed the $168 billion economic stimulus bill, which includes $150 billion in tax rebates. The rebate checks will be mailed out to taxpayers, in amounts as follows:

1. Individuals up to $600.
2. Married couples up to $1,200.
3. Those with children $300 per dependent child.

The plan also raises loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration, and provides $50 billion in tax incentives for businesses.

How the Tax Rebate Plan Affects You

The most obvious benefit is for those of you who will receive a tax rebate check, which are scheduled to start going out in May. However, the plan will also help those seeking larger mortgages, which can now be purchased by the government housing agencies. The plan is designed to stimulate the economy by providing incentives for businesses that need to expand. In this way, it could provide new jobs and help those who own small businesses.

There are other consequences of the Tax Rebate Plan on the economy, which will affect you later this year and next. It should increase consumer spending, which will increase GDP in Q3 and Q4. However, this may be too late to avoid a recession, which many economists say we are already experiencing.

Furthermore, if the tax cuts aren't balanced by a decrease in government spending, the decrease in revenue will lead to a larger budget deficit. This will will lead to further dollar decline, higher oil prices and inflation. Inflation will hamper the Fed's efforts to lower interest rates, which also stimulates the economy.

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