Making Work Pay! Repay it!

[Johan]

Bahahahahaha! (http://finance.yahoo.com/news/INSIDE-WASHINGTON-Rude-apf-15091434.html?.v=1)

Millions of Americans enjoying their small windfall from President Barack Obama's "Making Work Pay" tax credit are in for an unpleasant surprise next spring.

The government is going to want some of that money back.

The tax credit is supposed to provide up to $400 to individuals and $800 to married couples as part of the massive economic recovery package enacted in February. Most workers started receiving the credit through small increases in their paychecks in the past month.

But new tax withholding tables issued by the IRS could cause millions of taxpayers to get hundreds of dollars more than they are entitled to under the credit, money that will have to be repaid at tax time.

I'll bet most Americans had no idea that this "stimulus money" was actually, for millions of them, an interest-free loan, and that the government would want some of that money back. Interestingly, unlike a loan, you weren't told up front that you had to pay it back, and you weren't given a choice as to whether to receive it or not.

Bahaha!

[Narradisall]

You know, sometimes I wish we had a tax system like you guys, other times, it seems so confusing that you have to do some weird tax returns dance every year it makes it seem not worth it.

I'm still sure we're screwed for more tax though....

[CappinCanuck]

You know, sometimes I wish we had a tax system like you guys, other times, it seems so confusing that you have to do some weird tax returns dance every year it makes it seem not worth it.

I'm still sure we're screwed for more tax though....

Yeah, but your taxes pay for things. I never really understood the tax complaints from Americans and Canadians alike. People generally want and demand better healthcare, educations, transportation and efficiency across different sectors but also lower taxes.

Taxes are like an investment in your own nation, generally the more you put in the better returns you get. A better and healthier workforce will net you better jobs and less health costs. Don't have that 30 million to put into healthcare for preventative medicine and detection -- oh, no problem, we can just pay double that later, when treatment is required, so you don't have to worry about it now. This logic can be applied to most things. Of course, this doesn't mean there won't be some misspending on the government's part -- there will always be something tried and utterly failed but that's no reason to lose faith.

[National Kato]

But new tax withholding tables issued by the IRS could cause millions of taxpayers to get hundreds of dollars more than they are entitled to under the creditIsn't that saying that they're getting more than they're supposed to, and thus have to pay it back? Everything in the OP's link leans that way. So it doesn't sound like what Johan is opining.

The Internal Revenue Service acknowledges problems with the withholding tables but has done little to warn average taxpayers.Sounds like this has more to do with the IRS' bungling of withholding tables than the Obama tax credit. I don't see this as evidence that the stimulus money is a tax-free loan.

[Kelegacy]

The IRS is a fucking scam.

[headhunter228]

The IRS is a fucking scam.

Well, yeah. Our national debt is at $11 trillion. We don't get most of our spending money from taxes. We get it by borrowing it from other nations. And I'd bet that the stimulus bill is toing to make it worse, if it hasn't already. Thanks a fucking lot for giving me more to pay off.

Just ouf of curiosity, what would happen if everyone who ever loaned the government money decided they wanted it all back?

[Ravenlock]

I certainly knew. It's a stimulus. The entire point is to get money out there, hope for that money to stimulate the economy to make MORE money, and then balance the equation by putting it back later.

I'll happily grant you that most people are idiots, but that's what you'd have to be to think this money we don't have was just going to be created out of thin air and handed out with no future consequences.

In fact, what it sounds like to me is that you're ridiculing them for doing this in the only way it is actually feasible to do it. :confused: If they were, in fact, just shuffling around money that we don't have and not worrying about how that impacts things down the road, I think that would be worthy of ridicule. This on the other hand actually sounds like a considered plan, though I'll certainly agree with you that they need to do a much better job of communicating it if it's going to have any chance of helping.

...Well, and people would need to do something with the money other than buy shit from Japan and China. So maybe it never had a chance anyhow.

EDIT: On closer reading, the withholding tables part does seem like absolute nonsense, and I'm onboard with complaining about how bullshitty the tax code in general has always been. I just think it's more than a little disingenuous to paint them "wanting the stimulus money back" as some kind of sneaky maneuver on their part. It essentially being a loan to everybody is exactly how it's supposed to work.

[Ink Asylum]

Just ouf of curiosity, what would happen if everyone who ever loaned the government money decided they wanted it all back?

Worldwide economic collapse.

The same thing would happen in America if all American debt was called in at once. Not just consumer debt but company debt. There is so much fake wealth out there it's frightening.

[alienmastermind]

We would not default on the loans, we would threaten to cease aid to the countries we 'owe' money to.

It's all a balance, you could say. But, to blame any of the current financial crises on a man who has literally been in office for three months, and in the Senate prior for less than two years (when comically his LACK of experience was the big anti for his nomination in the first place) is in itself a little bizarre.

But it is what it is.

Most couples (speaking from experience), if they're smart, withold at a higher single rate to offset their double incomes. Especially when both make around the same amount. You don't end up owing at the end of the year and usually get some kind of a credit.

So while most married couples pay taxes, not all are foolish enough to take the credit for being a married couple without having children. So, while this would affect most middle income married couples, most don't file the way the article assumes they do (again, this is personal anecdotal evidence....most of the married folk I know withold higher to take advantage of the credits at the end).

[National Kato]

I just think it's more than a little disingenuous to paint them "wanting the stimulus money back" as some kind of sneaky maneuver on their part.

It's the IRS withholding tables not working as intended with the stimulus. It's not a sneaky maneuver at all...just another example of a change having unintended consequences with existing guidelines. I know it's a typical kneejerk reaction to blame Obama and the stimulus bill, but I don't see that as the reason for this problem. I'd be blaming the IRS.

[TheManEatingCow]

I'd be blaming the IRS.


Instead of blaming IRS, people should be blaming the ridiculously complicated tax laws that we have on the books. Yes, IRS screwed up. But they are just doing the best they can with the insanity that is our tax code. I'm actually shocked things like this don't happen more often than they do.

[Ravenlock]

It's the IRS withholding tables not working as intended with the stimulus. It's not a sneaky maneuver at all...just another example of a change having unintended consequences with existing guidelines. I know it's a typical kneejerk reaction to blame Obama and the stimulus bill, but I don't see that as the reason for this problem. I'd be blaming the IRS.

I think I agree, but Johan's initial post seemed very much to take the tone of "ha ha, you thought they were giving you free money, but secretly they're screwing you and you'll have to give it back!", so I was responding to that.

[National Kato]

Yeah, Ravenlock, we're on the same page.

[Ox]

Taxes are like an investment in your own nation, generally the more you put in the better returns you get.
Actually, in both private investment and taxation, putting more in gets you worse returns. There are diminishing returns in all things, including investment and taxation. The first $100 billion is spent in highly efficient ways. The next few hundred billions are spent in increasingly inefficient and obnoxious ways.

Just ouf of curiosity, what would happen if everyone who ever loaned the government money decided they wanted it all back?
This happens every day. You have got to remember: most loans, including government debt and your mortgage, are governed by a contract. My bank can't demand I pay the remaining $120,000 on my house tomorrow: my contract specifies I have to make regular monthly payments, and as long as I do that, the bank can't complain.

US debt works the same way: the government issues 10-year and 30-year bonds. You can't buy a 10-year bond the day it's issued, walk into your local Congressman's office, and say, "OK, now I want you to pay in full."

The US government has never defaulted on its sovereign debt. Each year, old bond issues come to maturity and we pay them off. We then borrow from new investors.

What would happen if people just stopped buying US government debt? I suppose if the whole world decided not to lend to us for any interest rate, we'd either have to severely curtail the budget or print money to make up the deficit. But you can't call in government debt before it's mature, so there's no way that $11 trillion could come due tomorrow.

[headhunter228]

As you could tell, I had no idea how that worked. Being 18, I've not had to take out a loan or a mortgage on anything yet. My beater car is paid for, so no loan or financing there. But $11 trillion is still a ridiculous amount of money to owe. Something needs to be done about that. Try balancing the budget, for once.

[National Kato]

Something needs to be done about that. Try balancing the budget, for once.

Ah, 2001...such sweet budget memories. :D

[Johan]

I'd be blaming the IRS.

The IRS did NOT write the legislation upon which this portion of the stimulus was passed.

Blame Congress, and the president who signed the bill into law as it stood. Who else to blame? The IRS doesn't make up the tax laws as they go along, you know.

[headhunter228]

Then there was Bill "Slick Willie" Clinton. I'm still not sure what to think about him. On one hand, there was the Monica Blowinski affair, but on the other hand, he balanced the budget for the first time in decades. I may be from Arkansas, but that means nothing.

[Narradisall]

Yeah, but your taxes pay for things.

What do yours pay for? Tic-tacs?

[TheKeck]

Bahahahahaha! (http://finance.yahoo.com/news/INSIDE-WASHINGTON-Rude-apf-15091434.html?.v=1)



I'll bet most Americans had no idea that this "stimulus money" was actually, for millions of them, an interest-free loan, and that the government would want some of that money back. Interestingly, unlike a loan, you weren't told up front that you had to pay it back, and you weren't given a choice as to whether to receive it or not.

Bahaha!
Yes, I love this crap. :(

[National Kato]

The IRS did NOT write the legislation upon which this portion of the stimulus was passed.

I was referring to the fact that the problem lies with the IRS withholding tables. Sure, they're following tax code set by Congress, but in the original link it seems quite apparent that the IRS is needing to modify the newest tables so that this problem doesn't occur. The tables are causing people to get more than they're entitled to under the stimulus bill, which clearly states what credits maximums are to be given. Hence, having to pay the additional monies back.

I know you're not a fan of the stimulus bill, but this seems to be an issue with the IRS tables instead.

[Johan]

I know you're not a fan of the stimulus bill

Actually, I'm mainly not a fan of the bill from the stimulus. It's in the mail, sent to our future selves.

[alienmastermind]

Um, yeah. Also, the filing as a married couple thing comes into it.

[Ravenlock]

Actually, I'm mainly not a fan of the bill from the stimulus. It's in the mail, sent to our future selves.

Clever! See this is what I don't get, the whole "we're cheating our children / future / puppies!" thing. The stimulus money - this stimulus money in particular, the "tax credit" that we're talking about, that the government is going to expect back from the taxpayers - is only going to cause you future pain if you waste it. If someone goes and buys a flatscreen TV with it and then doesn't have the money when they want it back, then yes, that will suck for them. But it also means they're an idiot.

You phrased it just right in your initial post, funnily enough - it's an interest free loan. That's a good thing. You're being given capital which you have the power to invest and turn into more capital. Or pay off debt, which would then allow you to make more capital. Or hell, just at least stick in an account somewhere that draws more interest than the inflation rate, and you still end up with more than you started with after you pay it back. The entire point is to enable people to better their own situations - trusting the people to know better what to do with that money than the government does. If they go blow it on ale and whores, well then the government was wrong and shouldn't have given it to them, but aren't we supposed to believe in personal responsibility and consequences for ignoring it?

It just strikes me as profoundly ironic that there's all this kvetching from opponents of the administration about the bloated nature of their spending (which, don't get me wrong, is a perfectly valid complaint, against this administration and the last), and then when they actually do something somewhat logical and realistic that won't automatically put us further in the hole, this huge cry goes up from the same people saying "What, you want this money back?" ...Huh?

[alienmastermind]

What would happen if people just stopped buying US government debt? I suppose if the whole world decided not to lend to us for any interest rate, we'd either have to severely curtail the budget or print money to make up the deficit. But you can't call in government debt before it's mature, so there's no way that $11 trillion could come due tomorrow.

You know, Ox, I have to say that your reasoned response is interesting. So interesting in fact, that we should fight with knives!

Not really.

Imagine the doomsday scenario, though, and America still comes out pretty far ahead. We can grow, within our borders, most of the food needed to feed our population and then some I read once. I'd suggest that if economic terrorism like 'We're calling in all the markers, we're puttin' the squeeze on ya, see!' happens, our retaliation would be much worse than nuclear war. We could just stop the food leaving our country.

[Ox]

Well... autarky is not really a good idea for us, either. And there's a big difference between defaulting on sovereign debt and closing the borders to trade: other countries, notably Argentina, have defaulted on their sovereign debt before, and while the economic effects were certainly very bad, Argentina didn't have to stop trading with the rest of the world. A country is not a monolithic entity.

But yes, a relatively small amount of our economy participates in global trade: something like $4.4 trillion (http://www.census.gov/foreign-trade/statistics/highlights/annual.html) out of a total GDP of $14 trillion (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm). We'd be only 30% poorer if we didn't trade. That's a lot less than smaller countries, like France, which gets 50% of its GDP through trade.