On one blazing Arizona afternoon what now seems like a century ago, I found myself seated at a lunch counter next to an older man who told me that he peddled solar panels for a living.This was at a time when the Southwest had just begun pushing solar energy, and when I queried Joe as to how hard it was to convince people to change their energy systems, he told me in an avuncular manner, "Son, when you speak like you know what you're talking about and you throw out a few numbers, it doesn't matter. Chances are they won't understand it anyway and that's when you convince them it's for the greater good."

Hmm. Sounds strangely like some of President Obama's tax break proposals for the stimulus package. America's newly installed chief executive plans to propose roughly $300 billion in tax cuts as part of an overall $800-plus-billion stimulus package. But there's some debate on the Hill as to what exactly the cuts are going to stimulate.

As I understand it, tax cuts purportedly stimulate the economy - and all the byproducts of stimulation, such as savings, job creation, investment et al. - usually when they're accompanied by tax rate reductions, which President Obama's are not.

Without any rate reduction, it would just involve moving a bunch of money around and not really stimulate much of anything. But like my lunch companion told me, if it sounds good - and President Obama has certainly presented it in the finest light - the people are likely to snap it up.

It may also help if you're selling your policies to a voter base unable to answer basic tax questions.

According to a recent poll of 1,000 taxpayers by H&R Block, nearly 60 percent didn't know the difference between a tax credit and a tax deduction, while 70 percent were not aware of any recent tax changes that could affect their returns. An astonishing 78 percent were not even sure what tax bracket they were in.

Back on Capitol Hill, there was a bit of pushback from lawmakers, giving the new commander-in-chief pause to revamp at least a portion of his stimulus tax break proposals.

Chief among them was a $3,000 tax credit for companies for every job they create or decide not to cut. Critics rightly point out that it would be fairly easy for companies to manipulate their reporting of actual and projected job cuts.

Other likely candidates for some form of modification or elimination are the payroll tax cut of $500 per year for individuals and $1,000 per year for couples, a cut too small to stimulate spending if spread out over 52 weekly paychecks, and a break that would enable companies to offset the loss for a tax year with income from the previous two years, a proposal that has been labeled too expensive.

Going forward, the president may yet want to seek out Joe's services. If he could sell solar energy door to door, tax break proposals to a public that may not quite understand them should pose no problem at all.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access