So lately President Bush has been pushing Congress to pass what he calls an "economic stimulus package" – which costs in total around 145 billion dollars. The package would, among other things, provide tax “rebate” checks to a select group of people.

Unfortunately, there are several problems with this plan. For starters, it's based on the notion that people who receive checks from the government will typically go out and spend the money, which will promote sales, job growth, etc. But that's not really how real life works, is it? Most responsible people would simply take the money and put it towards their existing debt rather than spend it. And while this might make banks happy, it would do little more than cutting interest rates would do.

More importantly, less responsible consumers who do go out and spend the money will likely tend to spend it on non-essential goods – computers, electronics, designer clothes, whatever. Sure, this is a supposition rather than fact, but let's face it – we already established that responsible people would use the money to pay off debt. So what would irresponsible people do? Spend it on things they don't really need. And while this will certainly help certain industries to an extent, it is far from stimulating the economy in general.

But the bigger issue I have with this plan isn't its economic viability. I have a problem with it's assumptions, and the implications that come with them.

According to a CBS report [1], the stimulus package will only provide full “rebate” checks for people making less than $75,000 adjusted gross income. People who earn between $75,000 and $174,000 will only get a partial rebate, and all others over $174,000 will get nothing.
Here's the major problem with that: people who make over $174,000 still pay taxes. Lots of taxes. Far more than those who make under $75,000. Yet apparently, Bush believes that they are somehow less deserving of getting a piece of their money back than those who didn't contribute as much. What's worse, the package allows for a $300 check to be sent to workers who make so little they don't even pay taxes!

This isn't an “economic stimulus package.” It isn't “tax rebates” either, because not everyone who pays taxes will get a check, and not everyone who gets a check paid taxes. Imagine if regular companies sold a product with a mail-in-rebate, and followed Bush's plan. Here's a nice example:

ABC Company sells a DVD Player for $50, with a $10 mail-in-rebate.

• Bruce buys a player, and sends in the rebate form. He gets a check in the mail for $10, and is told that he really should use the money to buy more products from ABC Company, because he really didn't deserve the rebate – he only received it because ABC Company wants to help him out by giving him a free gift of $10. Everyone hopes Bruce has forgotten that he's really just getting some of his own money back, as he paid $50 for the player.

• Bob buys a player, and sends in the rebate form, but is told that because his DVD collection is far larger than most, he is ineligible for the rebate.

• Bill doesn't buy the player, but sends in a rebate form anyway. ABC Company feels sorry for Bill because he can't enjoy their player, so they send him a partial rebate of $5. They figure they're still coming out ahead because they didn't have to send Bob anything.

It's really sad to see Republicans and Democrats uniting behind a plan that is really nothing more than simplified income redistribution. Sure, it's on a small scale, but at the end of the day, higher income tax payers are seeing their money being given to people who don't contribute as much (if any).

I'm really getting tired of this Progressive tax system in general. But that's another article for another day...