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Stimulus package tax credit should mean $8 to $10 a week

A little goes a long way, some experts say of the projected increase in take-home pay, but critics say individual taxpayers aren't getting a big enough break.

February 18, 2009|James Oliphant

WASHINGTON — President Obama signed the $787-billion stimulus package into law Tuesday while in Denver, his first major legislative victory and the final stroke in a six-week effort to jump-start the nation's struggling economy. Both houses of Congress passed the bill last week despite little Republican support.

Here are answers to some basic questions about the mammoth bill -- one of the biggest in U.S. history -- and how it could affect you and your family:

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How soon will I benefit from this?

If you are unemployed and have not already received an extension on your benefits, the package provides up to 33 weeks of extended benefits to those who have exhausted their regular 26 weeks, depending on an individual state's jobless rate.

Food stamp benefits will rise 13%.

Recipients of Social Security, Supplemental Security Income, railroad retirement benefits and veterans disability compensation or pension benefits will receive a one-time payment of $250.

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What happens to my healthcare if I lose my job?

Healthcare coverage after you lose your job can typically be extended through COBRA. Under the stimulus bill, the government will cover 65% of the total cost of your health insurance premiums for a total of nine months, if you lose or have lost your job between Sept. 1, 2008, and the end of this year. If eligible, you should only be responsible for paying 35% of your total premium.

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What benefits will I see if I am working?

You'll receive a $400 tax credit if you make less than $75,000, or an $800 credit for couples making less than $150,000 a year; it is slowly phased out if you make more than that. You should soon notice a change in your paycheck withholding, giving you an additional $8 to $10 a week.

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Eight to 10 dollars a week? How is that supposed to stimulate the economy?

Experts say a little goes a long way. Maybe you help keep a restaurant open by eating out when you otherwise wouldn't. Or perhaps you buy a pair of shoes you otherwise wouldn't (albeit not Manolo Blahniks).

The bottom line, proponents say, is that money will flow into the economy that wouldn't have before. Critics say the tax credit frees up too little cash for individual taxpayers.

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Why am I not getting a check directly from the IRS, like last year?

Because most people didn't spend that money. They saved it -- which did little to boost the economy. The White House and congressional Democrats said they did not want to repeat Bush administration economic policies.

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Is there anything in this bill to help keep my house from foreclosure?

Other than perhaps a little more money in your pocket, no. But foreclosure is expected to be the subject of the White House's next initiative, to be announced today.

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I keep hearing about the stimulus and the bailout. What's the difference?

The stimulus is a package of spending initiatives; investments in infrastructure, energy production and education; and tax cuts -- all designed to create jobs and leave people with (slightly) more money. The bailout, which was once called TARP and is now labeled the Financial Stability Plan, is a program through which the government is attempting to keep banks and other financial institutions stable by lending them capital and by helping to eliminate bad debts resulting from the collapse of the housing market. The goal there is to make credit more available for individuals and small businesses.

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How many jobs will this package create?

The White House estimates 3.5 million jobs will be created or saved in the next two years as a result of the bill. It has estimated these jobs on a state-by-state basis, including 396,000 in California. The jobs will come through a combination of new construction projects, business savings, and investments in energy and education.

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How will I be able to tell if this package is working?

Many experts say you might first notice when the economic news does not keep getting worse. After that, key indicators to watch are: fewer announcements of major job cuts by large companies; increasing consumer spending and confidence; more stable (and perhaps increasing) home prices; and a less frenetic stock market. But some economists have warned that the size of the package is simply too small to dramatically affect the United States' $14.2-trillion economy.

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Where can I find more information?

The White House has set up a website: www.recovery.gov "> www.recovery.gov . You can read the bill in full and find breakdowns in spending, tax cuts and infrastructure investment as well as the state-by-state projects for job creation.

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joliphant@tribune.com

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