President-elect Barack Obama's economic stimulus package will include hundreds of billions of dollars worth of tax breaks for individuals and businesses, according to a transition official and Democratic aides.
Obama is asking that tax cuts make up 40 percent of a stimulus package, the people say. The measure may be worth as much as $775 billion, a Democratic aide says, meaning tax cuts may constitute more than $300 billion of the legislation.
President-elect Barack Obama gestures at a news conference in Chicago. (Photo: China Daily)Making tax cuts such a large part of the stimulus may help win support from congressional Republicans. Senate Minority Leader Mitch McConnell, a Kentucky Republican, said his party would support an immediate middle-class tax cut as part of any stimulus package.
"Republicans, by and large, think tax relief is a great way to get money to people immediately," McConnell said on Sunday on ABC. The plan would attempt to boost consumer demand by spending $140 billion on tax breaks worth $500 for individuals and $1,000 for couples, according to a House Democratic aide. The change would come by altering tax-withholding rules, rather than through a rebate check as with the previous stimulus plan enacted last year, so that workers would see an immediate increase in their take-home pay.
The $500 tax credit would apply to the first $8,100 of wages, meaning a worker who earns $24,400 a year and is paid twice a month would get about $60 extra per paycheck for four months. For businesses, the aide said, lawmakers will use similar measures they have employed in past stimulus bills, such as allowing companies to get refunds for taxes paid in any or all of the past five years by deducting losses they have incurred now; those losses can currently only be carried back two years.
Congress is also likely to include incentives such as accelerated depreciation to encourage companies to buy equipment now rather than defer such investments. The plan also attempts to combat joblessness by offering companies tax breaks for hiring more workers, the aide said. The tax provisions are also likely to repeal the alternative minimum tax on municipal bonds issued to build airport runways, sewer systems and other privately run facilities that benefit the population at large, another aide said.
Congress is unlikely to enact a new round of incentives for US-based multinational corporations to repatriate foreign earnings at a discounted tax rate as urged by business groups such as the Chamber of Commerce, that aide said.
Many of the business tax incentives would be accelerated so that any dollar written off now would not be able to be claimed in future years, the aide said. That would reduce the long-term impact of the tax cuts on the federal budget deficit.
Obama met yesterday with congressional leaders from both parties to discuss the plan. Democrats said Congress probably will not be able to complete work on the plan by Jan 20, the day of the inauguration, as some had hoped.
Source:China Daily/Agencies
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