January 29, 2008 - In case you hadn't heard about it, Congress and the White House have been working on an economic stimulus package. A major portion of the package is likely to include tax refund checks for any individual making less than $75,000 per year. Married couples making less than $110,000 annually will also qualify. The government is hoping that when you get your check, you will run out and spend it. But that may not be the best choice for most people.

The economic stimulus package agreed to by the House of Representatives would have the IRS sending out refund checks of $600 to every individual tax payer that makes $75,000 or less. Couples would get $1,200 if they make less than $110,000. On top of this, every child within a qualifying household would receive an additional $300.

The Senate is working on its own version of the bill. There is a very real possibility that some of the demands being made by some Senate members will be unacceptable to the White House. This could slow down passage of a final bill, but most agree that some sort of package will eventually pass.

The tax refunds are not the only thing contained in the legislation. The bill will also give companies tax advantages for purchase of new equipment and for hiring more people.

The overall goal of the legislation is to put more Americans to work and to stimulate demand for manufacturing and services. If that happens, the economy could turn around rapidly.

Both the Bush Administration and Congress are hoping that once households receive their tax refund, they will rush out and make new purchases. There is good reason for this. Consumer demand is the single most important factor in a healthy economy. When consumers spend money, demand increases. When demand increases, new jobs are created. And so on, and so on...

But what the Bush administration wants is not necessarily in your best interests as a consumer. If you are worried about losing your job, then you would be much better served by placing your refund check in a bank account. If you are heavily in debt, then you will be better served paying off a credit card bill. In either case, you are doing nothing to stimulate the nation's economy, but you will be helping yourself out.

There is real reason for economic concern. Recent reports show that last year, housing prices actually fell when compared to 2006 levels. This is the first time since the Great Depression that the country has had a year over year decline in housing values. And in 2007, 405,000 Americans lost their homes to foreclosure. This is the highest number of foreclosures in history.

If a final stimulus package passes within the next two weeks, it will take a couple of months for the checks to hit your mailbox. When they do, ACCESS is advising its readers to think before they spend. A lot of people will be much better off by saving these pennies from heaven for a rainy day rather than buying a new TV.

by Jim Malmberg

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