Tax Rebate = Tax Increase for Some

The title is counter intuitive, so let me explain. The tax rebate as proposed is phased out for "high" income, for example a single with an AGI of $75,000. The $600 rebate is phased out over the $12,000 of AGI between $75,000 and $87,000. For someone with an income in this range, this is effectively a marginal tax increase of 5%. With an original marginal tax rate that's probably 5% (assuming deductions near the standard value), the effective tax rate is now 30%.

I am caught in this. If I had known about the tax rebate terms last year, I could have adjusted the amount of tax-deferred savings I converted to a Roth IRA.

I can see some merit to the argument that the tax rebate is really the US government borrowing money from the Chinese so the poor can buy Chinese goods. Either the bill for the tax rebate will have to be paid, or interest will be paid in the mean time. Probably increasing the taxes I'll have to pay on tax-deferred savings withdrawn in retirement. So in the end the extra taxes I effectively paid on part of my Roth conversions may balance out in the end.

Future Programming for Analog TV: Snow

An acquaintance commented last night that her TV broke. When she went to buy a cheap one, there were none to be found. In the group conversation that developed, no one was aware that analog TV broadcasts stop in just 17 months, on Feb 17, 2009. Only digital TV broadcasting will remain after that date. Right now it is illegal to sell a new set that doesn't include a digital tuner.

So what do you do if you have an analog TV set? If your TV reception goes through the cable company, then the issue is up to them. Your existing converter box probably will continue to work. On the other hand, if you use an antenna then you will have to do something yourself.

There is a Digital-to-Analog Converter Box Coupon Program scheduled to begin next year. Under this program, all US households will be eligible to request two $40 coupons towards converter boxes. These boxes are expected to retail for approximately $60 each, but are still under development.

If you use an antenna and want to use your analog set, I recommend that sometime next year you take advantage of this program. You may want to wait a few months for prices to stabilize. Next summer may be the optimum time. If you use rabbit ears you may find that a roof-top antenna is necessary. That has been my experience with a digital TV as I'm in a fringe area. While analog TV degrades into snow and perhaps ghosts, digital TV is perfect and then with degraded signals you might see a bit of pixelization, and a dark screen. Don't wait until the last minute to sort this out.