Outline of Economic Recovery Package from House Ways and Means Committee
January 27, 2009 by Tax Blog
Filed under Questions & Answers
An outline of the provisions under the Ways and Means Committee’s Jurisdiction included in the Economic Recovery package follows:
Tax Relief for Individuals
· “Making Work Pay Credit”
· Expand Earned Income Tax Credit (EITC)
· Increase in child tax credit, $0 floor
Education
· Simplification of education credits w/ $2,500 credit for first four years of higher education expenses (increase income limitations), with credit partially-refundable (40% refundable)
Housing
· Remove repayment requirement on $7,500 first-time home buyer credit for homes purchased after 2008 and before termination of credit (June 30, 2009)
· Coordination provisions with new grant program for low-income housing being designed by the Financial Services Committee
Business
· Bonus depreciation
· 5-year carryback of net operating losses (excluding companies receiving TARP benefits, Fannie Mae, Freddie Mac)
· Extension of increased small business expensing
· Expand work opportunity tax credit for disconnected youth and unemployed, recently-discharged veterans
· Prospectively repeal Treasury Section 382 ruling
State and Local Governments
· Allow financial institutions to purchase State and local bonds and other changes
· Repeal AMT limits on new private activity bonds
· Taxable bond option for governmental bonds
· School construction bonds
· One year deferral of withholding tax on government contractors
Distressed Areas
· Provide tax exempt bonds and tax credit bonds to “recovery zones.” These tax exempt bonds and tax credit bonds can be used for a wide array of purposes to stimulate economic development, including job training and education. A “recovery zone” would be an area within a State, city or county that has exhibited high unemployment, foreclosures or poverty. These bonds would be allocated automatically to States and large municipal governments based on the number of unemployed individuals within that area.
Energy Tax Incentives
· Long-term extension of renewable energy production tax credit
· Temporary election to claim the investment tax credit in lieu of the production tax credit
· Coordination provisions with new grant program for renewable energy projects being designed by the Energy and Commerce Committee (sections 45 and 48 projects)
· Clean Renewable Energy Bonds (“CREBs”)
· Qualified Energy Conservation Bonds
· Energy efficiency and conservation tax incentives under sections 25C, 25D and 48
· Smart energy conservation, energy efficiency, and renewable energy R&D credit
· Refueling property credit expansions
Trade Adjustment Assistance (TAA)
Updates, modernizes and expands TAA to cover service workers, and substantially improves and extends coverage to manufacturing workers
Triples funds for job training
Unemployment Insurance (UI)
· Encourage UI Modernization
· Continue the Emergency Unemployment Compensation Program
· Increase UI checks by $25/week
Additional Temporary Assistance for Needy Families (TANF)
· Provide additional TANF Contingency Funds to serve needy families
Supplemental Security Income (SSI)
Provide a one-time additional SSI Payment to Low-Income elderly and disabled recipients
Child Support Enforcement Funding
· Restore federal funding for Child Support Enforcement for 2 years
COBRA Healthcare for the Unemployed
· Provides temporary subsidies for health insurance coverage to those who have lost their jobs.
· Extends the availability of unsubsidized COBRA coverage for older and tenured workers beyond the 18 months provided under current law
Health Information Technology (HIT)
Establishes standards, payment incentives and privacy protections to encourage the widespread adoption of health information technology.
Extends Moratorium on Selected Medicare Regulations through October 1, 2009
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- House Ways and Means Committee :: Outline of Economic Recovery Package
TaxVox’s Lump of Coal Award: The Ten Worst Ideas of 2008
It was quite a year. Taxpayers are now shareholders in most major U.S. banks, a massive insurance conglomerate, and three failing car companies. After years of debating whether the government was implicitly or explicitly guaranteeing Fannie Mae and Freddie Mac debt, Washington settled the argument by buying the mortgage giants. I know George Bush liked to talk about an ownership society, but I never imagined this is what he had in mind.
And, of course, it was an election year. Thus, the opportunities for dumbness increased exponentially. Campaign promises veered from the improbable to the unworkable to the truly bizarre. With so many bad ideas to choose from, picking the lowlights was not easy. Nonetheless, here is TaxVox’s list of the 10 dumbest fiscal policy ideas of 2008.
10. Barack Obama’s plan to exempt seniors making $50,000 or less from tax. Most already pay nothing. Besides, anybody know why a 65-year-old should get a tax preference over a twenty-something making the same income? Senior discounts should be left to restaurants and movie theaters.
9. Hillary Clinton’s and John McCain’s summer gas tax holiday. Tell me again how we are going to end global warming? Obama gets extra credit for passing on this one.
8. Obama’s windfall profits tax for oil companies. Unfortunately, he couldn’t resist this bad idea.
7. The TARP. A $750 billion blank check. And after giving hundreds of billions to banks, Treasury neglected to make them lend the money to anyone. Polishing their balance sheets may help in the long-run, but hello….
6. Patching, but not fixing, the AMT. It may be a Golden Goody, but this failure of political leadership still smells. We used to worry about the cost of true reform, but that was so 2007.
5. Treasury unilaterally letting banks buy the tax losses of the financial institutions they acquire. The Wells Fargo rule is not only a terrible policy, but Treasury probably had no legal authority to adopt it. Otherwise, a heckuva good idea, as the current president might say.
4. Obama’s proposal to raise Social Security taxes on high-income earners—two years after the end of his second term. A new chapter in Profiles in Courage.
3. The Democrats definition of Middle Class: Obama says anyone making $250,000 or less belongs. Has anyone told him the median income is $61,500? Senator Barbara Mikulski (D-Md), wants to give a tax break to the same folks who borrow up to $49,000 to buy an American-made car. Cadillac owners unite! You have nothing to lose but your On-Star.
2. Extending the Bush Tax Cuts. Did I miss the day Congress etched these on stone tablets? McCain vowed to make them permanent. Obama said he’d repeal many of these breaks, but then assumed they’d last forever—a budget gimmick intended to make his own trillion-dollar promises seem less costly.
1. And the TPC Lump of Coal Award for the single worst idea of 2008: Fred Thompson’s plan to allow people to pick their own tax system. Choice is nice, but this puppy would cut government revenues by $7 trillion over 10 years. McCain and other Republicans all tinkered with this absurd idea, but we’ll give Thompson credit for being the first to raise it in the Presidential campaign. Happy 2009 to all.
Bad Markets and Deficits
Crumbling financial markets mean more awful news for governments already reeling from an economic slowdown and mortgage foreclosures. The only glimmer of optimism is that the sluggish revenues and rising spending that are around the corner should only be transitory. Assuming the markets and the economy rebound, these fiscal shocks will be a fading memory after a few years.
That won’t relieve short-term budget pressures. Nor will it make life any easier for a newly-elected President who will take office in the face of a deficit that CBO projected at nearly half a trillion dollars even before the markets cratered this week. But there is a big difference between the kind of one-time budget shocks caused by crashing financial markets and the trillions in long-term unfunded obligations that Washington is happily ignoring. That slow wasting of the nation’s financial underpinnings doesn’t grab headlines, but is far more dangerous.
If the current market correction ends up looking more or less like our last three big financial hiccups in 1987, 1990, and 2001-2003, capital gains tax collections will plunge for a year or two, but then bounce back.
After the market’s crash in 1987, these revenues fell 19 percent in 1988, flat-lined for a year, and then, as the stock market sagged again, dropped another 27 percent by 1991. However, through the rest of the 1990’s, capital gains taxes grew strongly as the market boomed. By 2000, Washington was collecting more than $120 billion in capital gains taxes, nearly four times what it got a decade before.
The pattern held after the tech bubble burst in 2001. Taxes on gains plunged by 59 percent through 2003, but then, with the market, they recovered. By 2005, revenues had climbed 50 percent, even though the top rate on gains had been cut to 15 percent.
Some states did not fare so well. California saw taxes on capital gains and stock options plunge by nearly $10 billion after the dot.com bust. And while those revenues have rebounded, the state has never quite gotten back on its fiscal feet.
Of course, some things are different this time, even for Washington. Thanks to the government’s unprecedented bailouts of Fannie Mae, Freddie Mac, Bear Stearns, and now AIG, Washington is on the hook for tens of billions and perhaps hundreds of billions more in spending that nobody foresaw even a couple of months ago.
It is not possible to put a dollar amount on those new obligations, which is very frightening. If the government ends up nationalizing more failing firms, the fiscal cost could become far more worrisome. But like spending for natural disasters, these bailouts are likely to be one-off expenditures. The government, thankfully, can buy AIG’s toxic assets only once.
Don’t get me wrong. This is all a very, very bad business. But unlike the future prospects for, say Medicare, this grim news has the potential to improve fairly soon.