First rebate checks sent to taxpayers
WASHINGTON (CNN) -- The federal government mailed out nearly 8 million tax rebate checks Friday, the first wave of about 92 million checks that will be sent out in the next 10 weeks.
The checks, which go to millions of Americans who filed a 2000 income tax return, range from a maximum amount of $300 for single filers to $600 for married taxpayers who filed jointly. Single parents will get about $500.
In order to get the full amount, a single taxpayer must have had at least $6,000 in taxable income for 2000; $12,000 for a married couple filing jointly.
The Internal Revenue Service sent letters to those who would receive rebates earlier this month, explaining that the checks are being sent out based on the last two digits of your Social Security number.
The rebates that went out beginning Friday were for people with the last two digits 00-09. The distribution schedule continues through September 24.
The rebates -- $38 billion worth -- are the product of President Bush's tax legislation that reduced the base income tax from 15 percent to 10 percent. The reduction is retroactive to January 2001, so what taxpayers are getting is a refund of taxes they have already overpaid this year through federal withholding from their paychecks.
To celebrate the mailing of the first checks, Vice President Dick Cheney and Treasury Secretary Paul O'Neill went to a government check-writing facility in Kansas City, Missouri. Friday. Bush joined them via satellite from Genoa, Italy, where he is participating in the G8 Summit.
Bush said the tax rebates will give families a break and should also stimulate the economy.
"Beginning late last summer and early fall, our economy, especially the manufacturing sector, began slowing," he said. "The combination of this tax relief and lower interest rates should help get it moving again."
Not everyone will get a rebate check. Those who did not file a return last year, those who had no taxable income and those who can be claimed as dependents on someone else's tax return will not qualify.
The amount of some taxpayers' checks may be smaller, too, if they owe any back taxes, child support payments or federal loan payments. The government will deduct those debts from rebate checks before sending them.
So how will you spend your rebate check, if you're getting one? About 47 percent of those questioned for a CNN/USA Today/Gallup poll said they would pay bills with the money, 32 percent will save it, 17 percent will spend it and 2 percent will donate their check to charity.
If you're undecided about how to spend the money, several stores are ready to help you make that crucial decision.
At Wal-Mart stores across the country, people can cash their checks on site or spend the amount in the store against the value of the check.
Home Depot stores are offering customers credit, based on the expected amounts of their rebates, until their checks come in. Some analysts say that if people immediately spend their checks, it could stimulate the economy.
"This is not a one shot deal. This is a down payment on future tax cuts, and I think people would be more apt to spend more of it than they would if they were just handed a one-shot rebate check," said Gerald Cohen of Merrill-Lynch. Others disagree.
"The problem right now is we're likely to see mounting job losses, and that's likely to erode confidence and induce consumers to save and not to spend," said Anirvan Banerji of the Economic Cycle Research Institute.
If you filed your 2000 income tax return late, your check will come after the end of September. And if you moved since you sent in that return, make sure you've filed an official change of address form with the U.S. Post Office.
The government says the checks will not be counted as taxable income for the 2001 federal tax returns, but residents of some states may have to pay slightly higher state taxes because of the rebates.
One of the states -- Iowa -- has already moved to trim the extra taxes. The others affected are Alabama, Louisiana, Missouri, Montana, North Dakota, Oklahoma and Oregon.
The situation came about because in those eight states taxpayers can deduct the amount they pay in federal taxes -- minus any refunds -- thereby reducing their taxable income.
But some state officials, believing people will see only that the rebate will mean higher state taxes, fear a backlash from taxpayers who will think the rebate is being taxed.
In Missouri the issue will be a subject of discussion at a special session of the legislature in September. Special sessions are being considered in Alabama and several of the other states, and a Montana official said something could be done in a future year to offset this year's slightly higher tax.
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