As the stimulus package works its way through Congress, many of you faithful readers are no doubt recalling the last time Congress gave us a "tax rebate" as part of an effort to pump up the economy, in 2001. There was a lot of discussion at the time about whether the rebate was actually a lowering of taxes or merely an "advance" of one's tax refund for that year. The proper characterization of the $300 or $600 check many people received that year was actually somewhat complicated. That was the year of the Bush tax cuts. Congress lowered tax rates and the IRS sent us checks in advance that recognized some of the lower rates to which we would be subject that year.
But however you looked at the 2001 checks, the checks proposed for this year seem to be real tax reductions. Of course nothing has passed Congress yet and anything could happen, but the language in the House-passed bill seems pretty clear: "there shall be allowed as a credit against the tax imposed by subtitle A for the first taxable year beginning in 2008 an amount equal to the lesser of— (1) net income tax liability, or (2) $600 ($1,200 in the case of a joint return)." So assuming you get the money (another section phases it out if you earn more than $75,000), it really would lower your taxes. This isn't just an advance, it's a rebate.