Aug. 19, 2009, 8:34PM

At the six month anniversary of President Barack Obama’s signature “achievement” — the $787 billion stimulus measure — it’s important to separate economic fact from fiction.

While persuading Democratic lawmakers to pass the massive spending bill without reading it, the White House promised the stimulus would provide “an immediate jolt” to the U.S. economy, create millions of new jobs and keep unemployment under 8 percent.

None of those promises has materialized.

If the stimulus is working so well, where are all the jobs? Two million more American jobs have been lost, the economy continues to contract and the unemployment rate is at 9.4 percent and likely headed higher. The government reported recently that extended mass layoffs are at a record high.

The fact is the stimulus is too slow, not focused on jobs, and wasteful.

Only 10 percent of the stimulus money has hit the U.S. economy. To put it in Texas terms, if the American economy is the length of a football field, the stimulus spending so far is equal to the length of your two shoes. No one — at least with a straight face — can credibly claim it is driving an economic recovery. I didn’t vote for this then and I believe congressional leaders and the White House should admit it’s not working.

Only half of the stimulus spending will make its way through federal and state bureaucracy by early 2011 — long after the economy really needs it and just as critics correctly predicted.

Very little of this government’s spending has created new jobs. The whopping $1.10 a day tax cut hasn’t spurred any consumer spending, because most people didn’t even notice it. Funding for roads and infrastructure is roughly 5 percent of the overall stimulus spending. It’s appalling to me that more stimulus dollars will be wasted on things like buying new public art than spent helping small businesses survive this recession.

So far, the stimulus has only served as a bailout to state governments so Democratic and Republican governors alike can claim balanced budgets.

And, unfortunately, as predicted, far too much of the spending has been wasteful.

While it is difficult for an average taxpayer — or even a member of Congress — to track the spending, each day the media reports on some outrageous boondoggle: a $3 million turtle crossing in Florida, $50,000 for a hand puppet project through the National Endowment for the Arts, new office furniture for federal executives. An even more blatant example of the misuse of money occurred in Union, N.Y. The city was given $600,000 for a homeless program that it never requested. The city doesn’t have homeless issues nor a homeless program. When city leaders protested, the federal government told them to “get creative.”

With America’s crushing federal deficits worrying investors and inviting embarrassing lectures from China, we should all be asking ourselves, Is this how we want our tax dollars spent?

Borrowing more than a trillion dollars to pay for all this will eventually put a drag on America’s recovery, along with increased energy prices from the cap-and-trade scheme and major tax increases on professionals and small businesses included in the health care reform bill.

Rather than send Vice President Joe Biden out on the stump making wild claims about the stimulus to an increasingly skeptical America, it’s time to repeal the unspent portion of this boondoggle and start showing the world we are serious about getting our financial house in order.

Brady, the ranking House Republican on the Joint Economic Committee, represents the 8th District of Texas.

Mack said:

“The vast majority of Americans agree: the Democrats’ stimulus plan has been an absolute failure.

“Since the stimulus was signed into law, over two million Americans have lost their jobs, and the unemployment rate has jumped from 7.6 percent to 9.4 percent. What’s more, the plan has only paid out approximately 10 percent of the funds – with only $1.5 billion paid out for transportation infrastructure projects.

“The only thing that the Democrats’ ill-conceived stimulus bill has been able to guarantee is that our children and grandchildren will inherit a legacy of more spending, more debt, more regulations and more government.

“As I have said before, no nation has ever spent its way to prosperity. Instead of ramming job-killing plans through Congress, like a government takeover of our nation’s health care system and a national energy tax, we should look to pro-growth solutions that allow private businesses, and not the government, to become the catalysts for job creation. Only then can our economy bounce back stronger than ever.”

A USA Today/Gallup Poll found that 57 percent of adults say the stimulus is having no impact on the economy or is making it worse. The poll also found that 60 percent of Americans do not believe that the stimulus will help the economy in the years ahead.

The Obama administration appears to be sending mixed signals on whether a second stimulus package will be needed to pull the U.S. economy out of a deep and prolonged recession. Democrats and Republicans are expressing dissatisfaction with the impact of the $787 billion stimulus package President Barack Obama signed into law in February.

Obama economic advisor Laura Tyson says the federal government should begin crafting a second package to stimulate the U.S. economy on what she termed a “contingency basis,” Tyson said.

“We are in a situation where the economic outlook is very uncertain and the risks are all on the downside [conditions could worsen]. It looks like the economy is weaker than expected. Why not begin to think about, over the next several months, whether we need a stimulus package and what it should include, so that we are ready [to act] as we get more information?”

Tyson spoke at a conference in Singapore. Her remarks raised eyebrows among economists and political analysts, coming two days after Vice President Joe Biden downplayed the suggestion that another stimulus package is needed.

“I think it is premature to make that judgment,” Biden said.

Biden spoke on the “Fox News Sunday” television program.  He admitted that, when President Obama entered office, the administration had “misread” the economy and how severe U.S. job losses would become. But the vice president said February’s stimulus package, the biggest-ever federal effort to jumpstart the U.S. economy, was the proper tool to promote growth.

The $787 billion package includes infrastructure projects, energy initiatives, educational programs, aid for struggling state governments and tax cuts spread over a two-to-three year period.

House of Representatives Majority Leader Steny Hoyer helped craft an early version of the bill.

“I do not think anybody can honestly say that we are satisfied with the results so far. But we believe that the stimulus was absolutely essential,” Hoyer said. We need to get the money that is already in the stimulus bill out [spend it].”

But appropriating federal funds takes time. And many of the lawmakers who championed the bill are frustrated by the lag between enactment of the stimulus plan and getting the money into the economy.

Republicans say the fact that unemployment continues to mount more than four months after the stimulus package was signed into law shows that the plan was flawed from the start.

House Minority Leader John Boehner also appeared on Fox News Sunday.

“This [stimulus plan] was supposed to be about jobs, jobs and jobs. And the fact is, it turned into nothing more than spending, spending and more spending,” Boehner said.

In February, President Obama said the stimulus plan would save or create more than two million jobs. Success or failure is hard to prove, given that no one knows how much worse the economy would be if no stimulus had been undertaken, according to former Congressional Budget Office Director Douglas Holtz-Eakin.

“We will never know what the world would have looked like without the stimulus package,”Holtz-Eakin said. “So we will never be able to put numbers on exactly what the impact was.”

Holtz-Eakin appeared on Bloomberg television. He said America’s worsening employment picture illustrates the limits of the federal government’s ability to generate economic activity quickly.

He said he is skeptical of the current stimulus package and would opposed to a second one.

“We should hold off and really be cognizant of the fact that the U.S. has a very daunting fiscal outlook,”Holtz-Eakin said. “We cannot afford to be spending money without thinking what we will get for it.”

Other economists argue that at a time when businesses and consumers are cutting back on spending, the federal government is the only entity capable of jolting the economy out of recession.

Reporting from Las Vegas — When pundits and reporters set out to chart the progress of the Obama administration at 100 days, some in the White House disparaged the exercise as a foolish contrivance focused on a meaningless marker. But today the White House conjured up its own 100-day milestone — the time elapsed since passage of the president’s economic stimulus bill — and used the occasion for a round of self-congratulation.

“One hundred days ago, in the midst of the worst economic crisis in half a century, we passed the most sweeping economic recovery act in history: a plan designed to save jobs, create new ones and put money in people’s pockets,” President Obama said after touring a solar energy farm on the edge of Las Vegas. “One hundred days later, we’re already seeing results.”

“This is just the beginning. There are still too many Americans out of work and too many who worry that their job may be next,” Obama said. “There are still too many families struggling to pay the bills and too many businesses struggling to keep their doors open . . . that is why my administration will continue an unrelenting, day-by-day effort to fight for economic recovery on all fronts.”

Still, his tone was unmistakably upbeat, and the White House sought to bolster the president’s comments by releasing a long list of construction projects nationwide funded by the stimulus bill. Included was work on the San Diego Freeway in Los Angeles at the Sepulveda Pass.

The president came to Nellis Air Force Base to tout its solar-energy production as a national model for job creation in a greener environment. The solar panels built on part of an old landfill provide about a quarter of the electricity used by the 12,000 people who live and work on the base.

“In this case, what happens in Vegas should not stay in Vegas,” Obama said, drawing a burst of laughter from the crowd of enlisted men and women seated inside a sweltering hangar.

Policy aside, the main purpose of the president’s two-day Western swing was to raise campaign money: in Las Vegas for Senate Majority Leader Harry Reid, the home-state lawmaker, and tonight in Beverly Hills for the national Democratic Party.

By staging a nonpolitical event such as the one in Las Vegas, the White House can bill taxpayers for at least part of the tab. It is a common practice, used by both parties when they control the White House.

Investors and lawmakers attending the Dow Jones Infrastructure Summit Thursday weren’t particularly enthused about the $30 billion that President Barack Obama’s administration has slated for infrastructure in its economic stimulus package.

Their biggest issue: it simply isn’t enough, not coming anywhere close to the $2 trillion estimated to be needed to help the U.S.’s infrastructure catch up to that in many other developed nations.

“The stimulus is a down payment,” said Patrick Natale, executive director of the American Society of Civil Engineers, which gave U.S. infrastructure a grade of D- in 2008. “It’s a start but there’s a lot more to do.”

At the same time, however, they have some issues with how the money is intended to be spent, worrying that the national government is exerting too much control by handing out money to a few select programs. Infrastructure needs might be better served if states were left to figure out on their own what was needed to improve infrastructure, with some federal oversight.

“It’s interesting that we’re looking to the federal government to help local projects,” said Michael Smith, partner at Baker & McKenzie LLP. “[The federal government] can’t do it in its entirety because the dollars are not infinite.”

Still others think that the stimulus bill is ill-advised in regards to infrastructure, because it does nothing to addess the economic needs of the nation over the long run.

“The stimulus bill is not focused on true, long-term needs,” said Leonard Gilroy, director of government reform at the Reason Foundation. “I don’t see it as making the U.S. more economically competitive.”

American International Group should be allowed to go bankrupt because keeping it and other sick financials alive on government support risks ruining the US economy, legendary investor Jim Rogers told CNBC Tuesday.

AIG [AIG 0.3992 -0.0308 (-7.16%) ], whose $61.66 billion fourth-quarter loss was the largest ever for a US company, received $30 billion more in government funds Monday. The insurer’s financial health hasn’t improved despite getting as much as $150 billion from the government last year.

“Suppose AIG goes bankrupt, it is better that AIG goes bankrupt and we have a horrible two or three years than that the whole US goes bankrupt,” Rogers said. “AIG has trillions of dollars of obligations, let them fail, let the courts sort it out and start over. Otherwise we’ll never start over.”

On Monday, CEO Edward Liddy told CNBC that the insurer is far more stable and secure than it was last fall but acknowledged that it was “difficult to say” if AIG will need even more money from the government in the future.

Bailing out the banks is going to increase the debt spiral and finally cause the destruction of the world’s biggest economy, Rogers said.

* Slideshow: Origins of the Financial Crisis, Then and Now

“I think it’s astonishing, they’re ruining the US economy, they’re ruining the US government, they’re ruining the US central bank and they’re ruining the US dollar,” he said.

“You are watching something in front of our eyes, very historically, which is basically the destruction of New York as a financial center and the destruction of America as the world’s most powerful country.”

Japan’s economic “lost decade” was caused by trying to bail out the banks, and the West risks running out of money if it doesn’t let the bad banks fail now, Rogers warned.

Systemic risk is going to be the same in 10 months, 5 years of 10 years if the fundamental problem is not solved, he added.

Credit Crisis
CNBC.com
Credit Crisis

“The idea that you have too much debt, too much borrowing and too much consumption and you’re going to solve that problem with more debt, more consumption and more borrowing? These people are nuts.”

Wall Street and the City of London are going to be “disastrous” for years, like in the 1950s and 1960s, and in 30 years, finance will “dry up and wither away” as we are entering a “long period of hard times,” he said.

“Power is shifting now from the money shifters, the guys who trade paper and money, to people who produce real goods. What you should do is become a farmer, or start a farming network,” Rogers said.

Pro: Help Your Country

by Mark Karlin, BuzzFlash.com

A short time ago, my wife and I bought an American car, a Ford (F) Focus, and I left the dealership feeling very proud.

I didn’t expect that—the pride in doing our small part to help maintain the U.S. auto industry while it reinvents itself—but it was there. We’re Americans, and we are assisting American skilled workers and an industry that is essential to our nation’s economic recovery, as well as one potentially significant to our national security (as it was in World War II).

Some private industries are integral to long-term national financial viability. The Detroit car industry—like our aircraft manufacturing capacity—falls into this category.

We are all aware that in today’s global economy some parts on U.S. cars are from overseas, and even some models are assembled elsewhere. But the fact remains that a nation that abandons its core manufacturing base is committing itself to economic dependence on overseas corporations and countries.

So the question for my wife and me was this: Do we go with a slightly higher-rated foreign compact or an American car that has just about caught up?

We didn’t have to ponder long. Detroit and the UAW need consumers to believe in the present and future of a revitalized U.S. transportation industry. And yes, I fully support transportation diversification into high-speed trains, mass transit, and other alternatives to cars, but it’s easier to branch out from an existing production capacity than to start from scratch.

The best economic investment in realizing that goal is to buy an American car.

Con: Buy What’s Best

by Aliyah Marr, Freshasylum.wordpress.com

Why shouldn’t Americans buy the cars that suit their needs? When I went to shop for my first car, I was admonished to “buy American.” But I bought a three-year-old Celica based upon Toyota’s (TM) reputation. At the same time, my sister, who had always driven long-lasting Toyotas, felt pressured to buy American: She purchased a three-year-old Ford Taurus. In six months the engine block of the Taurus cracked. Sixteen years later, my Toyota was still running when I sold it.

I want a car that is fuel-efficient, environmentally friendly, and easy to maintain, and lasts a long time. I will buy from the car manufacturer who understands my needs and concerns. If that company is American, I will buy American. Otherwise the free market ensures that better products will successfully vie for my dollar.

For years, U.S. car companies knew they needed to design fuel-efficient and environmentally friendly cars. But they continued to make gas-guzzling pollution machines, while the consumer suffered at the gas pump, and the air grew worse.

A message has to be sent to the leaders of the industry: “Make a product that suits the needs of consumers, and they will buy.”

It is not fair to expect us to purchase a car that doesn’t meet our needs. I will buy American when it’s a product I can be proud of, a 21st century car good for me and the environment. Until then, my wallet is voting for the best car it can buy.

Money for workers in the $787 billion federal economic stimulus package isn’t set up the same way it was in last year’s $700 billion measure.

Many people used their stimulus checks last year for big-ticket items or for battling debts, rather than everyday spending.

This time, the dollars are coming in the form of a tax break. The American Recovery and Reinvestment Act calls for fewer tax dollars being taken out of paychecks of 95 percent of Americans.

“The total cumulative effect of the measure makes it the largest tax cut for the middle class ever,” said 1st District Congressman Tim Walz.

The Making Work Pay credit starts April 1. The math works out to be on average of $13 a week more in your wallet if you have FICA taxes taken out of your paycheck. It lasts two years, so in January, the average amount will be $9.

Individuals are eligible for a credit of up to $400 a year and married couples filing jointly up to $800.

People wanting to do the math can take it straight from the IRS: “This tax credit will be calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.”

Employers should check the new IRS withholding tables.

If you don’t take taxes out of your paycheck, the IRS requires you to report the credit on your income tax return next year. If you don’t work and are on Social Security or veterans benefits, the government will cut you a $250 check.

Walz said the stimulus act extends the unemployment benefits effective already. The national unemployment rate is 7.9 percent, with District 1 about 6.9 percent.

“The average time to find a job is longer,” he said.

Other tax credits

There are several tax credits intended to boost consumer spending. They range from college to car sales and from home remodeling to home purchases. Most are in effect for two years.

“I think those are the ones that are going to affect people the most,” Walz said.

Here are some of them:

The act extends a measure that gives businesses a break on capital expenses, encouraging building projects. They can get a full credit of up to $250,000 and a partial credit of up to $800,000.

Small businesses — annual receipts of less than $15 million — that face net operating losses can spread them out over five years instead of two. These are often referred to as “carrybacks.”

The qualifying factors for the $1,000 refundable child credit is eased. You can begin to claim it at $3,000 and get the full amount after $6,667 in income.

The marriage penalty on the earned-income tax credit is gone. Married couples can have a higher combined income and still get the credit. And the act extends EITC to larger families. Families with three or more children can get the benefit on up to 45 percent of their earned income. The credit’s top climbs to $5,657 for filing jointly, three kids and earning up to $45,295.

Let’s talk cars. The act allows taxpayers on next year’s federal return to deduct state and local sales taxes from the purchase a new car, light truck or motorcycle up to $49,500 between Feb. 17 and the end of this year. The break phases out at the adjusted gross income of $125,000 or for joint filers $250,000.

In general, the act will not affect your 2008 federal income tax return. But it will affect your 2009 return, which you file next year. Here’s an exception:

First-time home buyers who buy this year are eligible for a maximum credit of $8,000 that — get this — can be claimed on the 2008 tax return, the one due April 15, 2009. People who buy this year but after the filing deadline and before Dec. 1 can claim it on next year’s taxes. The max credit for purchases in 2008 is $7,500. People who claim the credit and don’t wish to repay it must live in their homes for three years. The credit phases out if you earn more than $75,000 or $150,000 for joint filers.

If you remodel or buy appliances, be sure to ask about tax credits on energy-efficient products. There are several provisions, but you could qualify for a 30 percent tax credit, up to $1,500.

The Hope Scholarship, temporarily renamed the American Opportunity Tax Credit, is up to $2,500 per student per year for tuition and related expenses for the first four years of college. The previous level was $1,800. It phases out starting at $160,000 in earnings for couples, for singles $80,000.

What else?

There are other provisions in the American Recovery and Reinvestment Act, such as food stamps, Medicaid, law enforcement, job training, public education, infrastructure and the always-controversial alternative minimum tax.

Walz said dollars are being dispersed through existing federal funding mechanisms. The results of many aspects of the bill will depend on how state and federal agencies disperse them and on how the agencies interpret the act’s language. He said the accountability for how the money is being spent is at an unprecedented level.

He said last year’s bailouts and stimulus package suffered from lack of accountability and said fear of the measures not working crushed their effectiveness.

American Recovery and Reinvestment Act, he said, will be more transparent to the public and Congress will bring a hammer on anyone taking wrongful advantages.

“The public needs to see every penny wisely spent,” Walz said.

Jobs

Using direct and accumulative impacts, President Barack Obama’s administration estimates the stimulus package will create 3.5 million jobs in America over the next two years, with 90 percent in the private sector.

The White House issued a table that shows the estimated effect in each congressional district. It estimates 7,800 jobs over two years in District 1 of Minnesota and 7,400 jobs in the 4th District of Iowa. It estimates 66,000 jobs created in the next two years for all of Minnesota and 37,000 for Iowa.

“The Reinvestment Act would slow national unemployment rates by 2.1 percentage points,” Walz said.

He mentioned economists who said if left unchecked the unemployment rate would have hit 11 percent in 18 months but with the stimulus package is estimated to hit 8.9. It still climbs, Walz said, but not as drastic.

Q: Who is eligible to claim the tax credit?

A: First-time home buyers purchasing any kind of home — new or resale — are eligible.

Q: What is the definition of a first-time home buyer?

A: The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his or her spouse. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

Q: How is the amount of the tax credit determined?

A: The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

Q: Are there any income limits for claiming the tax credit?

A: The tax credit amount is reduced for buyers with a modified adjusted gross income of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with modified adjusted gross income of more than $95,000 (single) or $170,000 (married).

Q: What is “modified adjusted gross income”?

A: Modified adjusted gross income is defined by the Internal Revenue Service. To find it, a taxpayer must first determine “adjusted gross income.” Adjusted gross income is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. Note that adjusted gross income includes all forms of income including wages, salaries, interest income, dividends and capital gains. To determine modified adjusted gross income, add to adjusted gross income certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education.

Q: If my modified adjusted gross income is above the limit, do I qualify for any tax credit?

A: Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose modified adjusted gross income exceeds the phase-out limits.

Q: How is this home buyer tax credit different from the tax credit that Congress enacted in July?

A: The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous credit was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.

Q: How do I claim the tax credit? Do I need to complete a form or application?

A: Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return.

Q: What types of homes will qualify?

A: Any home that will be used as a principal residence will qualify for the credit.

Q: I read that the tax credit is “refundable.” What does that mean?

A: The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion of the amount of the refundable tax credit.

Q: Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?

A: Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the homeowner is treated by the tax code as having been “purchased” on the date the owner first occupies the house.

Q: Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond program?

A: Yes. The tax credit can be combined with the mortgage revenue bond home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in a mortgage revenue bond program.

Q: I am not a U.S. citizen. Can I claim the tax credit?

A: Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase.

Q: I bought a home in 2008. Do I qualify for this credit?

A: No, but if you purchased your first home between April 9 and Jan. 1, you may qualify for a different tax credit.

Q: If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?

A: Yes. The law allows taxpayers to choose (”elect”) to treat qualified home purchases in 2009 as if the purchase occurred on Dec. 31, 2008. This means that the 2008 income limit (modified adjusted gross income) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 will know the 2008 modified adjusted gross income with certainty, thereby helping the buyer know whether the income limit will reduce the credit amount.

Source: www.federalhousingtaxcredit.com

Looking to install a new energyefficient furnace? Uncle Sam could help pay for it, thanks to the federal government’s new economic stimulus program.

Buying a new car? You’ll be able to claim a federal income tax deduction on the sales taxes you pay on all but the most expensive vehicles.

In the market for a house? The stimulus package offers a tax credit of up to $8,000 on home purchases through the end of November.

“It’s an added bonus,” said Christopher Sucharski, a first-time home buyer who earlier this month closed on a house in Newfane.

While Sucharski already was looking to buy a house before the stimulus package was approved, he said the tax credit will make it easier to afford the inevitable costs of furnishing and sprucing up his new home.

The $787 billion economic stimulus program adopted earlier this month includes a wide range of tax breaks and incentives, many aimed at encouraging consumers to spend money while also easing the tax burden on most families.

The tax cuts included in the stimulus plan will reduce the tax burden on 97 percent of American families, according to estimates from the Tax Policy Center, a Washington, D. C., think tank.

The effect of those tax cuts will boost the average family’s after-tax income by 2 percent, or an average of $1,179, the center estimates. The biggest tax savings will go to people in the bottom fifth of the income spectrum. Those taxpayers will see their after-tax incomes rise by an average of 4.7 percent.

Almost half of the $280 billion in tax cuts included in the stimulus plan will go toward the “Making Work Pay” tax credit — worth up to $400 for individuals and $800 for couples—that will be distributed by reducing the amount of taxes withheld from pay checks by April 1.

“The idea seems to be that, if people get the credit through their paychecks, the

money is more likely to get into circulation, rather than stuck into a savings account or used to pay down debt,” said Mark Luscombe, a tax analyst at CCH Inc.

Many other aspects of the stimulus program that are aimed at individuals, however, will take a year or so to have an effect. That’s because a significant portion of the stimulus package relies on tax breaks that taxpayers won’t be able to cash in until they file their federal income tax returns next year.

Here’s a look at other portions of the stimulus program that could affect you:

Unemployed workers

• Workers receiving unemployment benefits won’t have to pay income taxes on the first $2,400 in benefits received this year. Those benefits previously had been completely taxable.

• Unemployment benefits will rise temporarily by $25 a week.

• Unemployment benefits will also include a 33-week expansion, extending the period laid-off workers in New York can get the benefits to 59 weeks.

• The federal government will pay 65 percent of the health insurance premiums unemployed workers pay under the COBRA program, which lets former employees keep the same health coverage they had at their old jobs.

The subsidies apply to workers who were laid off between Sept. 1, 2008, and the end of 2009 and will last for up to nine months.

Workers who lost their jobs between Sept. 1, 2008, and Feb. 17 and didn’t sign up for health coverage under COBRA will get an extra 60 days to reconsider under the new terms. The subsidy is limited to workers whose incomes are less than $125,000 for individuals and $250,000 for couples filing jointly.

The COBRA provisions are important because the cost of health insurance can eat up most of a laid-off worker’s unemployment benefits. In New York, the typical monthly cost of COBRA family coverage amounts to about 85 percent of a worker’s average monthly unemployment benefits, according to the Families USA Foundation.

First-time home buyers

• First-time home buyers who purchase a home between Jan. 1 and Nov. 30 can qualify for a tax credit of up to $8,000, or 10 percent of the purchase price. The one catch is that those home buyers will have to pay the credit back if they sell the home within three years or it stops being their principal residence during that time.

The stimulus program’s home buyer tax credit was enough of an incentive to convince Karen Freeburg to buy a house a year earlier than she had planned.

“It’s definitely a nice incentive,” said Freeburg, who has agreed to buy a Cape Cod in the Town of Tonawanda.

With up to $8,000 coming her way through next year’s tax return, Freeburg said the extra money will help her fix up her new home the way she wants.

“I figure it will help pay for a new fence,” she said. The home buyer tax credit is lucrative, but it also can be complex, said David Schlein, a partner at Lumsden & McCormick, a Buffalo accounting firm.

The credit starts to phase out for buyers with incomes above $75,000 for individuals and $150,000 for couples.

Still, the credit included in the stimulus plan is more lucrative than a similar benefit that was in effect last year. That credit included a provision that required the $7,500 tax break be repaid over a 15-year period, effectively turning it into an interest-free loan.

• Homeowners who make energy-efficient improvements to their property can qualify for tax credits of up to 30 percent, or a maximum of $1,500.

The tax credit covers high-efficiency furnaces or tankless water heaters installed this year or in 2010 and can dovetail with rebates currently available for National Fuel utility customers.

“It’s a nice complement to what we have available with our conservation incentive program,” said Julie Coppola Cox, a National Fuel spokeswoman. “It makes energy efficiency that much more affordable.”

The federal tax credits also cover energy-efficiency improvements that aren’t part of the National Fuel program, including qualified windows, insulation, central air conditioning systems and metal or asphalt roofing.

A detailed list of qualified improvements is available at www.energystar.gov .

Car buyers

This deduction on the purchase of a new car could be lucrative to Buffalo Niagara residents because of the region’s high sales taxes.

The provision allows new car buyers to deduct the sales and excise taxes they pay on vehicles purchased after Feb. 16 through the end of this year.

The deduction is limited to the first $49,500 of the vehicle’s purchase price and is phased out for buyers whose incomes exceed $125,000 for individuals and $250,000 for couples filing jointly.

Because the deduction helps reduce your taxable income, even taxpayers who claim the standard deduction can claim this tax break. But the tax savings will depend on a taxpayer’s tax bracket.

A taxpayer who buys a $25,000 car in Erie County will pay $2,188 in sales tax on that vehicle. If that taxpayer is in the 25 percent tax bracket, the tax break would be worth a quarter of those sales taxes, which would cut almost $547 off their federal income tax bill for 2009.

Students

• The stimulus plan replaces the Hope Scholarship credit, which was worth a maximum of $1,800, with a new credit that is worth up to $2,500 both this year and in 2010. The credit covers the first $2,000 in eligible expenses, such as tuition, fees and books, and then 25 percent of the next $2,000 in eligible expenses, said Joe Hurley, who runs the Savingforcollege.com Web site.

The new credit also is 40 percent refundable, which means it is paid to taxpayers even if they have little or no tax liability.

The new credit is available to more families than the old Hope credit was, and can be used for the third and fourth years of college, as well as the first two years, Hurley said. The income limits for the new credit also are higher, phasing out for incomes above $80,000 for individuals and $160,000 for couples filing jointly, up from $50,000 and $100,000 under the Hope program.

• The stimulus program also allows funds from Section 529 college savings plans this year and in 2010 to be used to purchase computers and other computer equipment, as well as to pay for Internet access, Hurley said.

• The maximum Pell Grant for low-income students will rise by $500 to $5,350 for the 2009-10 academic year and to $5,500 the next.

Low-income workers

• More taxpayers will be eligible to claim the child tax credit. The stimulus package also makes it easier for taxpayers who don’t owe any income tax to claim the credit.

Under last year’s rules, taxpayers with dependent children under age 17 needed at least $8,500 in income to benefit from the credit. The stimulus plan lowers that income threshold to $3,000.

• The earned income tax credit also is expanding for the next two years. The maximum credit for a qualifying family with three or more children will rise by $629 to $5,657.

• Food stamp benefits will increase by 13.6 percent, hiking the maximum monthly benefit for a family of four by $80 to $668 from $588, according to the U. S. Department of Agriculture.

• Individuals who receive Social Security benefits; railroad retirees; disabled veterans; and government retirees who aren’t eligible for Social Security will receive a one-time payment of $250.