Chuck asks:

> I still do not understand how you see this as paying back.
>
>  If I make the same income this year as last I will receive a larger refund
>  due to the reduced tax rate and the fact that I have been, and by your
>  argument, will continue to pay tax at the previous rate through the end of
>  this year.

There is one additional complication in all of this. The tax reduction plan
passed by Congress this year and made retroactive to the beginning of the
year is being phased in over a five year period, presuming nothing happens
between now and then to have Congress change its mind.

Your taxes next year are going to be very similar to what you paid last year.
There won't be a significant reduction in rates for the coming year.
Unfortunately, we won't know until later in the year what the specific rates
are.


>  Now, when I file my return I am not paying back the $600 they sent me. I
>  will simply receive $600 less of the larger refund at that time because I
>  already received it. There is no payback involved no matter how the facts
>  are twisted.

I didn't expect this level of semantic difficulty.

The process that is underway is very similar to what H&R Block calls an
"anticipation loan." When you file your taxes with them, you have the option
of getting your refund instantly rather than waiting for the IRS check to
come. H&R Block certainly isn't giving you the money out of their own pocket,
at least for very long. What you do is sign your check over to them and they
take it when it comes, plus a hefty fee. In the process, you get your money
now (less the fee) and you "pay it back" to them when the check actually
arrives.


>  And personally, I like having that money in my hand earning me interest or
>  paying off a bill instead of sitting idle on some goverment balance sheet.

That's the entirety of the Bush plan. Indeed, this general idea is popular
enough that many people will pay H&R Block a substantial interest penalty
simply to get their money quicker. By comparison, this is an interest-free
loan. Nonetheless, you will pay it back in the spring by not getting that
portion of your refund.

However, in my original posting on this subject, I mentioned that many people
who are now calling us are irate because they're getting either little or no
"advanced payment." I also mentioned also that I suspect that many more will
be even more disturbed when they find that their next year's refund will be
reduced by whatever amount they receive now.

A large percentage of people use payroll deductions as an enforced savings
plan, even though that money draws no interest during the year. Nonetheless,
they like the large yearend lump-sum refunds.

These people can be dismissed as the ignorant masses who don't pay close
attention to the news, but in this case, I don't think anyone would have a
clear idea of what is going on, even if you read every newspaper available to
you and that was the point of my original posting.


>  Out of curiosity. I have heard similar arguments, along with some more
>  outrageous ones, in the last few months. Is there some kind of Democratic
>  party newsletter going around with suggested talking points?

If it is of any interest, I seemed to shocked some people last year when I
announced in my tutorial at HPWorld that I have been a lifelong Republican,
and that I will actually vote for them when they nominate people who can
pronounce six polysyllabic words in a row and know what they mean.

If you want to classify me, put me in the John McCain/Barry Goldwater/Lowell
Weicker/Abraham Lincoln wing of the party. In that regard, and for exactly
that reason, I'm not big on misinformation, pandering or dissembling.

Wirt Atmar

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