Democrats on the House Ways and Means Committee have released a tax plan that they hope will provide additional economic stimulus to taxpayers who have yet to demonstrate the effectiveness of last year's stimulus package.
The new plan includes a $500 tax cut for single taxpayers and $1,000 for married couples. Rather than sending checks, the tax cut is expected to be achieved by reduced withholding, thus positioning this stimulus attempt as one focused on working Americans, as opposed to the 2008 plan which included many citizens who receive benefits but not earned income. This benefit would phase out with incomes of $75,000 for single workers and $150,000 for married workers.
The current $1,000 child tax credit would become a refundable credit with no upper cap on income, and new college tuition credits are included in the plan. An expansion of the controversial Earned Income Tax Credit is also included.
The current credit available to first-time home buyers is a credit that must be paid back. The new legislation would take away the requirement for repaying the credit.
The House plan calls for additional write offs to small businesses investing in capital expenditures over the next two years. As the Wall Street Journal reports, this type of bonus depreciation has been tried in the past with limited success. The plan includes an option for certain businesses to carry back net operating losses for five years instead of the current two-year option. Companies that benefited from the TARP (Troubled Assets Relief Program) bailout plan would not be eligible to participate in the new carry back rules.
Additional measures include a job credit to businesses who hire unemployed veterans or disconnected youth, i.e. unemployed young adults age 16 to 25 who are no longer attending school.
The Senate is expected to offer a tax stimulus bill of its own, and then the wrangling begins as the House and Senate attempt to reach a settlement on one bill that can be presented to President Obama.