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February 12th, 2009 (Modified on March 6th, 2009)

(Update1) Why is the Stimulus Shorting Consumers?

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The New York times called lawmakers’ ability to reduce the size of the stimulus package a defiance of “Washington’s peculiar laws of physics.”

Don’t be too proud.

It seems lawmakers were able to do so by trimming key portions of the stimulus that had the potential to positively impact taxpayers — you know, those poor souls who are actually footing the bill.

According to The Times, the current version of the legislation, awaiting a vote in the House, trimmed Obama’s middle-class tax cut — originally set to provide individuals up to $500, and couples $1,000 — to $400 and $800, shaving $30 billion off the top.

We’ve gotten a lot of positive feedback on our post “Is the $15,000 Tax Credit a Good Idea.” Unfortunately that generous tax break that would not have to be paid back, is being nearly chopped in half:

Although details were still being worked out, officials said that eligible first-time homebuyers would be able to claim a credit of $8,000.

Even those on social security and disability are likely to experience a haircut:

Social security and disability recipients will get a one time payment of $250, down from an original proposal of $300.

Also, according to Automotive News:

WASHINGTON — A proposed tax break for new-vehicle buyers is dramatically scaled back in the final version of the economic stimulus bill.

Auto dealers and their allies had sought to make interest on auto loans and the sales and excise taxes on new-vehicle purchases deductible from federal taxes. Proponents say those measures are needed to boost showroom traffic and sales.

But the final stimulus bill — a compromise between House and Senate negotiators — makes only sales and excise taxes deductible. The loan interest provision was dropped, a spokeswoman for Sen. Barbara Mikulski confirmed today.

Why would lawmakers be willing to cut back on the most popular portions of this bill?

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One Response to “(Update1) Why is the Stimulus Shorting Consumers?”

  1. moi Says: February 17th, 2009 at 10:55 am

    I think we must become more active in our government. Perhaps this: a campaign by us to recall the worst offenders in Congress and to keep recalling them (and having them replaced by people who are going to put funds where they will do the most good) until this gets fixed. This is a FIASCO so far and I am concerned that things are not going to get better until we, the people, take action within our governmental system to fix it ourselves!

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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