States May Take Slice of Bush Rebate Checks

By Seth Lewis | July 7, 2008 | 8:27pm EDT

(CNSNews.com) - When the Bush tax-rebate checks - $300 for singles, $600 for families - are mailed to taxpayers this summer, they may come with a caveat: It's time to pay taxes on that tax rebate.

Huh?

Indeed, in at least nine states - and possibly many others - the kickbacks from the $1.35 trillion tax cut may be taxed retroactively, the American Legislative Exchange Council said Wednesday.

"There's the question of whether the states would be so greedy," said Bob Adams, a spokesman with the American Legislative Exchange Council. "The answer is - unless you've been living under a rock lately - absolutely, positively yes. States spend every dime they can get their hands on."

States may be especially eager to carve out a share of the tax rebates after the Bush plan killed the estate tax, a move the National Governors Association estimated would cost states between $50 billion and $100 billion in future revenue.

But Republican lawmakers in Iowa - one of the nine states with tax codes requiring retroactive taxes - are already taking steps to exempt the latest refund.

GOP officials estimate Iowans would receive $404.9 million in rebates - and then have to pay back $20.2 million on a 5-percent state tax. So lawmakers are drafting special-session legislation to tweak the tax code.

It's that upcoming vote that may be the silver lining to this tax-rebate wrinkle, says the anti-tax lobby group Americans for Tax Reform.

"It could wind up being a real help with state Republicans," spokesman Robert Funk said.

That's because a vote against the exemption in Iowa, for instance, will come back to haunt lawmakers who wanted to double-tax their constituents, Funk said.

"It's kind of a strange little quirk in these tax laws," Funk said, "but we can definitely turn it into something positive."

At least nine states - Iowa, Alabama, Louisiana, Missouri, Montana, North Dakota, Oklahoma, Oregon and Utah - will consider the refunds taxable, and other states may do the same depending on how they interpret existing laws.

"It all boils down to how the state looks at the rebate," Adams said.

CNSNews Reader,

The media are hard at work weaving a web of confusion, misinformation, and conspiracy surrounding the COVID-19 pandemic.

CNSNews covers the stories that the liberal media are afraid to touch. It drives the national debate through real, honest journalism—not by misrepresenting or ignoring the facts.

CNSNews has emerged as the conservative media’s lynchpin for original reporting, investigative reporting, and breaking news. We are part of the only organization purely dedicated to this critical mission and we need your help to fuel this fight.

Donate today to help CNSNews continue to report on topics that the liberal media refuse to touch. $25 a month goes a long way in the fight for a free and fair media.

And now, thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, you can make up to a $300 gift to the 501(c)(3) non-profit organization of your choice and use it as a tax deduction on your 2020 taxes, even if you take the standard deduction on your returns.

— The CNSNews Team

DONATE

Connect

Sign up for our CNSNews Daily Newsletter to receive the latest news.