Front Range Financial Consulting

Now that President Bush has signed a $168 billion economic-stimulus package that includes one-time payments to more than 131 million households, taxpayers are asking two key questions:

1) How will the stimulus plan affect me?2) Will the stimulus plan be enough to stave off recession?

Unfortunately, no one really knows the answer to either question.

What we do know is that the Treasury Department plans to distribute about $112 billion to taxpayers starting in May. That means that most individuals who file a 2007 tax return will receive up to $600, while married couples could get as much as $1,200. In each case, taxpayers may be eligible for an additional $300 per child.

The plan also includes a number of business-tax breaks. For example, it doubles to $250,000 the amount that many small businesses can write off immediately for their 2008 capital investments.

These payments are not subject to subsequent taxation, nor will they reduce any future refunds due to taxpayers.

While many low-income individuals who pay little or no federal income tax also will get checks, many upper-income Americans will not. The amounts begin to phase out for incomes above $75,000 for individuals and $150,000 for married couples filing jointly.

Nor are the rules all that clear cut. For example, payments for Social Security recipients and military veterans receiving disability benefits are calculated differently than for other Americans.

The stimulus program is part of a bipartisan effort designed to get cash into the hands of the people most likely to spend it quickly, thereby helping to reinvigorate the economy and deflect a recession.

However, many analysts are concerned that, rather than spend those rebates and inject more money into the economy, most Americans, at least initially, will hang onto their cash as a buffer against possible lean times to come. How long they refrain from spending will depend not only on how tough times get, but on how long they can resist the lures of retailers seeking to ramp up their revenues.