DOGE head Elon Musk stated on X (formerly Twitter) that he would ‘check with the President,’ Donald Trump, about a proposal to provide a $5,000 refund check to U.S. taxpayers, funded by cost savings from his Department of Government Efficiency (DOGE).
Dubbed the ‘DOGE Dividend,’ the initiative was originally proposed by James Fishback, CEO of Azoria Investment Firm, and aims to redistribute 20% of DOGE’s projected savings by 2026 to taxpaying households.
The ‘DOGE Dividend’ explained
The ‘DOGE Dividend’ proposal suggests that approximately 20% of the $2 trillion in projected government savings should be allocated toward tax refunds.
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Under the plan, only households that are net payers of federal income tax would be eligible for the $5,000 refund. This differentiates it from the 2020 pandemic stimulus payments, which were based on income thresholds rather than tax contributions.
According to data from the Tax Policy Center, around 40.1% of U.S. tax filers do not pay federal income tax, meaning only about 59.9% of the 132 million U.S. households would qualify for the refund, according to data shared by the finance commentary platform The Kobeissi Letter on February 20.
The plan would boost morale, incentivize labor force participation, and reward taxpayers for their contributions, unlike broad stimulus payments that were distributed regardless of tax liability.
Potential market and economic impact
The proposal has drawn comparisons to the $4 trillion in stimulus payments distributed during the COVID-19 pandemic, which contributed to the current inflationary environment.
However, the DOGE Dividend differs in a crucial way—it would be funded by cost savings rather than deficit spending. While this could lessen the inflationary impact, economists caution that redirecting $400 billion from government savings into consumer pockets could still stimulate demand and put upward pressure on inflation.
That being said, personal savings rates are near historic lows at around 4%, raising concerns that much of this money would be spent rather than saved. Increased consumer spending could provide a short-term boost to retail and service industries but may also worsen existing inflationary pressures.
DOGE savings and controversy
While Musk has expressed interest in discussing the proposal with Trump, DOGE’s actual savings remain a subject of debate.
As of now, DOGE claims to have saved approximately $55 billion through various cost-cutting initiatives, including contract renegotiations, asset sales, and workforce reductions.
However, a Bloomberg report suggests that only $16.6 billion in verified savings has been accounted for, and The New York Times found instances of exaggerated figures, including an $8 billion contract revision that was actually $8 million.
Featured image via Shutterstock
