Washington President Bush said Friday that "help is on the way" as the first tax refund checks hit the mail, but more than 34 million taxpayers will get no check most because the Social Security and Medicare payroll taxes they paid don't count.
The tax refund checks of up to $300 for individuals, $500 for heads of households and $600 for married couples filing jointly are based on income tax liability during 2000.
Most of those left out paid income taxes during the year, along with their Social Security and Medicare taxes. But they claimed enough credits, such as the $500 child tax credit and education credits, to get a refund that ultimately reduced their income tax to zero meaning they don't qualify for a check.
If the Treasury Department's projection of 34 million is accurate, it would mean about one in four taxpayers will get no refund check.
Checks won't be in the mail for taxpayers who were claimed as dependents on someone else's return, even those who had tax liability last year. Nonresident aliens also get nothing.
Bush, speaking via satellite hookup to a tax cut event in Kansas City, Mo., said the refund checks marked the first installment of the 10-year, $1.35 trillion tax relief package he signed into law last month. Even though the president's original budget included no immediate tax relief, Bush said the checks would help stimulate the struggling economy by putting money into people's hands now.
"The combination of this tax relief and lower interest rates should help get it moving again," Bush said from Genoa, Italy, where he is attending an economic summit. "For all those who feel their taxes and bills are too high, and they could use a little help, help is on the way."
Bush spoke at a Treasury Department processing center where some of the first batch of almost 8 million checks were going out in the mail. Vice President Dick Cheney and Treasury Secretary Paul O'Neill also attended what amounted to a celebration of the Republican-led tax cut, Bush's biggest legislative accomplishment during his first six months in office.
Yet Democrats argue that the people most in need of immediate tax relief are those 34 million taxpayers who won't be getting checks. Senate Budget Committee Democrats say the bulk of those people are in the bottom three-fifths of income earners, those making less than $44,000 a year.
Senate Majority Leader Tom Daschle, D-S.D., was careful Friday not to criticize the refund checks Democrats actually came up with the idea first but said they should have been sent to everyone who pays federal taxes, including payroll taxes.
Daschle predicted that Republicans could suffer some political backlash because "they're going to raise the expectations for a lot of people that aren't going to get any check at all."
The Internal Revenue Service mailed two separate notices to taxpayers about the checks, which are based on 2000 tax returns. One described how much taxpayers who get checks will receive and when they should arrive; the other listed reasons some wouldn't be getting one.
The IRS intended the notices to clear up confusion, but many taxpayers have been calling the agency to pin down why they were left out. "I think we're all going to be getting a lot of calls," said Rep. Earl Pomeroy, D-N.D.
About 32 million notices with bad news about the checks went out this week, but IRS officials say that was before all returns were processed and does not count taxpayers with extensions who still haven't filed.
Some could still get their money when they file their 2001 tax returns next April. For example, a recent college graduate who is single, earning money and no longer a dependent could qualify for a $300 credit next year. A family whose income rose in 2001 might pay enough tax this time to claim a credit for $600.
Some people will get checks for less than the promised amount because they didn't pay enough income taxes in 2000. Others will get smaller checks because they owe delinquent child support, back taxes or are behind on student loans.
In this first batch of checks, about $245 million was deducted for these reasons, including $205 million in back taxes, according to the IRS.