- It was a time much like the financial turmoil period that spurred President Bush to enact his second tax rebate in 2008. America in 1974 was in the midst of financial difficulties. Inflation and unemployment were wreaking havoc on the system. At the time, President Gerald Ford desperately needed a way to put the brakes on the rapidly spiraling economy. He devised a plan for ground-breaking economic stimulus---a tax rebate.
- In President Ford's Tax Reduction Act of 1975, each American receiving Social Security bemefots received $50. Other taxpayers received 10 percent rebates of their tax liability, with the amount of the rebate capped at $200. There was a $100 minimum rebate. The Tax Reduction Act went into effect March 29, 1975, and the first checks were issued in May.
- The Earned Income Tax Credit was born in the stimulus package passed in 1975. It was the first time that taxpayers were given the relief that many come to rely on today. The EITC is a tax credit for low income taxpayers. It is based on earnings and the number of dependents the taxpayer has.
- President Ford's rebate did not seem to affect the economy much. Most of the checks were either deposited into savings accounts or used to pay down debts. In fact, the recession raged on until 1980 despite a series of tax cuts and other stimulus activities. Because President Ford's rebate seemed to fail to meet its goals, the rebate proposed by President Bush and even one proposed by President Carter received lukewarm receptions.
- So why did Ford and Bush after him want to do the rebate? Because, the premise behind the rebate makes sense. Give the taxpayer back some of their money and they will spend it. This spending spurs sales. These sales generate revenue for several parties who can buy more, hire more and produce more. Ford envisioned that, eventually, the economy would pick up, inflation slow and unemployment numbers decrease. He did not anticipate that the taxpayers would, in essence, sit on the extra cash.
