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US Stimulus Plan To Include USD300bn In Tax Cuts,
by Mike Godfrey, Tax-News.com, Washington
Tuesday, January 06, 2009
It is understood that tax cuts worth more than USD300bn, targeted towards both
individual and business taxpayers, will make up just under half of President-elect
Barack Obama's economic recovery plan, which is currently being worked on by
senior Congressional Democrats.
Aides to Obama revealed over the weekend that, as reported last month, Obama
is seeking to incorporate aspects of his election campaign tax plan into the
stimulus plan, the centrepiece of which is likely to be the Making Work Pay
tax credit that would provide a USD500 credit for single workers earning less
than USD200,000 annually, and USD1,000 for couples. This credit could also be
made retroactive to the 2008 tax year. Those who do not currently earn enough
to pay income tax would also receive some kind of payment to offset their social
security and Medicare taxes, it is believed.
As the economic recovery plan slowly begins to take shape, more details are
emerging from the Obama camp about plans for business tax breaks, said to be
worth USD100bn to USD150bn and targeted specifically towards job creation. Again,
Obama's preferred method for providing tax relief seems to be through the use
of tax credits, and it is thought likely that his campaign pledge to provide
a job creation tax credit worth USD3,000 per new employee will form part of the tax cuts in the
recovery plan. A tax credit could also be given to firms to encourage
them to retain staff as unemployment figures begin to rise sharply.
In addition, Obama’s campaign team are examining the possibility of building
upon business tax relief granted under the smaller-scale economic stimulus package
signed by President Bush last February. This could mean that bonus depreciation
allowing a taxpayer to depreciate 50% of the cost of an asset in the year in
which the asset was acquired could be extended, along with the increased Section
179 elective expensing limit, which now stands at USD250,000 as a result of
the Bush package. Indeed, there is already support for such a move in Congress,
with a bipartisan group of Senators having introduced legislation in November to extend these tax
breaks for an additional year, to the end of 2009.
The Obama plan could also improve loss carryback rules to allow businesses
to claim refunds by offsetting current losses against prior tax years.
Obama is expected to announce a progress report on the proposed tax and spending measures to be included in the recovery plan later this week. However, with Congress expected to deliberate long and hard on the finished proposals, the stimulus package is not expected to be passed into law until well into February.
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