Monday, January 19, 2009

House Democrats Give Shape to Tax-Cut Plans

From the Washington Post:

House Democrats yesterday offered a more detailed analysis of a $275 billion tax-cut plan that gives two-thirds of its benefits to individual taxpayers, part of the $825 billion stimulus package they hope to send to President-elect Barack Obama before President's Day.

After tinkering with Obama's proposals, Democrats on the Ways and Means Committee released a plan that focused relief on individuals, reducing the amount of tax cuts intended for businesses that the incoming administration initially requested. The cuts would be phased out after two years.

The Senate Finance Committee is expected to release its own tax plan, which will be similar in scope but likely to include differing details, soon. The tax cuts could grow to nearly $350 billion if congressional leaders eventually add a provision that keeps upper-middle-class workers from creeping into a tax bracket that was originally designed to ensure the wealthiest families did not shelter too much of their income from the Internal Revenue Service.

The House Democrats' package includes $145 billion worth of income tax cuts for most Americans, $500 per year for individuals and $1,000 per year for families, which would mostly occur by reduced withholdings from paychecks. Another $32 billion in relief comes from increasing the eligibility for child tax credits and a new credit for college tuition. Under the House Ways and Means Committee plan, small businesses would be allowed to write off up to $125,000 in capital expenditures, costing the Treasury an estimated $41 billion -- the largest benefit given to businesses.

The tax package also includes an unusual credit to businesses that hire unemployed veterans or "disconnected youth," a credit for the first 40 percent of $6,000 in their wages. As defined by House Democrats, disconnected youth are those who are 16 to 25 years old, out of school at least six months and not working.

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