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1 J. D. Foster, Rebates, Prebates and Freebates: Congressional Tax Proposals Ignore Administrative Burden 1 (2001)

handle is hein.taxfoundation/repretigxz0001 and id is 1 raw text is: TAX -Iii FOUNDATION December 2001 Rebates, Prebates and Freebates: Congressional Tax Proposals Ignore Administrative Burden Recent events have made Americans more sympathetic to the thankless work performed by civil servants including fire- men and postal workers. Now, thanks to the new freebate provision in the stimu- lus package being crafted by Congres- sional leaders, we will soon be able to add IRS workers to the list. The whole rebate, prebate, freebate fiasco began in the usual Washington way-on a Sunday morning talk show. Let's cut checks and send what comes to $300 to every one of the almost The whole rebate, prebate, freebate fiasco began in the usual Washington way - on a Sunday morning talk show, 200 million taxpayers in America, said Senator Joseph Lieberman during a March 25th interview. These twenty words have led to a series of colossal mailings to the nation's taxpayers that are adding up to one of the most burdensome exercises in the history of the income tax. Taking a Bad Idea and Running With It First, the Bush administration ab- sorbed Lieberman's idea and proposed rebating, in advance, the tax relief that would come from their plan to create a new 10 percent tax bracket. Technically, these checks wouldn't be rebates, which Webster's defines as a return of a part of a payment, because taxpayers haven't filed their 2001 returns yet. Hence, prebates. So the IRS had to use year 2000 return data to guesstimate the proper recipients, amounts, addresses, etc. The checks were to be $300 for singles and $600 for joint returns, if the recipients had paid that much in 2000. Concerned that taxpayers would be confused by receiving a check rather than a tax bill from Uncle Sam, the IRS first needed to send out notification letters to every taxpayer who qualified. The word- ing of that letter became a major beltway brouhaha, but the IRS gritted its teeth and managed to get 93 million letters and then 93 million checks delivered on schedule over the late summer and early fall. But that happy ending is not the end of this story. Back came the prebates. More than 295,000 checks were returned as undeliverable. Now, the IRS is busy trying to make these checks available through other means. What's more, because many taxpayers did not receive a prebate (because they did not pay any income taxes in 2000 or couldn't be located) the IRS had to change the 2001 tax forms. Changes in- clude an additional line on the standard John S. Barry Chief Economist Tax Foundation

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