Maggie Clark will use it to support her golf habit. An unidentified businessman, when asked what he would spend his federal tax rebate on, said simply, “Beer.”
From frivolous mini-spending sprees to padding saving accounts, business folks in Mississippi are anticipating ways to spend their tax rebates.
Last week, Uncle Sam began sending letters to taxpayers, telling them how much money they will get back under President George W. Bush’s recently approved tax plan and when it will arrive.
Treasury Secretary Paul O’Neill said the first 11 million checks will be mailed July 20, with 11 million refunds mailed weekly until Sept. 28. This summer, 98 million Americans will receive refunds.
Single taxpayers will receive up to $300, single-parent taxpayers up to $500 and married couples up to $600. Taxpayers in the higher brackets also are getting refund checks.
“These days, $600 doesn’t go that far,” said Bill Brame of Madison. “Now if you were talking $6,000, my list would be worth talking about.”
But not everyone will receive a refund check.
“About 25% of people won’t get one because they don’t even pay taxes at all, and it’s unlikely that more than half of Americans will get the full $300 or $600 maximum refund,” said William Shughart, Ph.D., an economics professor at the University of Mississippi.
Ironically, if federal taxes are included, Mississippi’s total tax rate, as a percentage of personal income, ranks lowest in the nation. However, if only state and local taxes are considered, the state’s ranking climbs to No. 29.
But as a percentage of personal income for the period from FY1989 to FY1999, Mississippi is the fourth highest state in tax growth in the nation, according to a 2000 analysis by The Tax Foundation, a nonprofit, nonpartisan policy research organization that has monitored fiscal issues at the federal, state and local levels since 1937.
“As far as an economic resurgence, I believe that the tax cut that is now in place is a good start towards less taxes, rules and regulations,” said Harry Lott, president of Jackson-based Vision Innovations (VI), a Web software consultation, marketing, management, site hosting and graphic design service firm. “These three have been slowly strangling the small- to mid-size business.”
Lott plans to spend his tax rebate on a special holiday gift, perhaps a vacation, for his family.
Key provisions of the tax bill, signed into law June 7, include doubling the per-child tax credit to $1,000, reducing the marriage penalty and eliminating the inheritance tax. Contribution levels to IRAs and 401(k) plans for higher income families will increase, and the adoption tax credit will double, to $10,000, and become permanent under the new law.
“A cut in the capital gains tax should be forthcoming, anything that constricts the mobility of capital hurts young businesses,” Lott said. “New technologies and new business models that are centered on the customer that utilize the Internet will likely lead the economic resurgence replacing slower, older bureaucratic organizations. I believe that we are about to see more change in the next decade than ever before and that uncertainty scares the markets. It is during times of change that the most wealth is created and the standard of living for all is improved.”
Economists have estimated the refund checks and rate cuts combined would have a positive impact of only about half a percentage point on the nation’s gross domestic product, assuming taxpayers spend part of the money. The $74-billion tax cut for FY2001 reflects only a tiny fraction of the nation’s $10-trillion economy.
Nancy L. Anderson, CFA, president of New Perspectives Inc. in Clinton, has earmarked her refund toward a “much-needed vacation.”
“From what I am hearing, most people already have the money spent,” she said. “They will be using it to pay on credit card balances. Debt is at an all-time high for American families right now, so I’m afraid this rebate may not spur the activity that Washington is hoping for.”
Contact MBJ contributing writer Lynne Wilbanks Jeter at firstname.lastname@example.org or (601) 853-3967.