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January 29, 2008

Vote buying package clears House (we’re all Keynesians now)

by Jason Pye

The so-called “economic stimulus package” passed the House of Representatives this afternoon and will move over to the Senate for final passage, assuming there are no changes, before heading to the President’s desk:

The House, seizing a rare moment of bipartisanship to respond to the economy’s slump, overwhelmingly passed a $146 billion aid package Tuesday that would speed rebates of $600-$1,200 to most taxpayers.

The plan, approved 385-35 after little debate, would send at least some rebate to anyone with at least $3,000 in income, with more going to families with children and less going to wealthier taxpayers.

It faced a murky future in the Senate, though, where Democrats and Republicans backed a larger package that adds billions of dollars for senior citizens and the unemployed, and shrinks the rebate to $500 for individuals and $1,000 for couples. That plan, written by Finance Committee Chairman Max Baucus, would deliver checks even to the richest taxpayers, who are disqualified under the House-passed measure.

Both versions would provide tax breaks to businesses to spur equipment and other purchases.

Republicans from the Georgia Congressional delegation voted against the plan, and rightfully so due to the fact that this type of Keynesian economics has been disproven time and time again.

You can view the roll call vote here.

Here in Georgia, State Rep. Chuck Martin has proposed legislation that would supposedly exempt the rebates from the state income tax:

Rep. Chuck Martin (R-Alpharetta) is pushing legislation co-sponsored by leaders of both parties to make sure Georgians don’t have to pay state income taxes on the stimulus checks they might be receiving from the federal government.

And, unlike the stimulus plan, Martin said his bill doesn’t have any income caps. So more affluent Georgians who don’t receive a check would also get a tax break if the measure is approved.

The savings: on average about $72 for individuals, $144 for couples without children, a little more for families with kids.

However, the Tax Foundation casts doubt on Martin’s proposal:

We’ve read the text of the bill (which just adds a one-year income exclusion, without changing any other laws) and the relevant statute, and we can’t figure this out. When filing taxes, Georgia instructs filers to start with federal adjusted gross income and then subtract state deductions. The stimulus rebate check, as an advance on the 2008 tax refund, would not increase or decrease federal adjusted gross income, so why would it affect state taxes?

It may well be that Georgia legislators want to give taxpayers a one-year cut in their income tax. But if they’re doing that, they might want to get rid of the bottom five income tax rates which apply to income earned under $7,000.

Georgia has $1.6 billion in reserve, and the best tax relief the state can come up with is this small exclusion on a cash advance against a future federal tax hike and the Governor’s weak property tax cut proposal.


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