House Passes Economic Stimulus Package

by Mike Godfrey, Tax-News.com, Washington

31 January 2008

The United States House of Representatives has approved legislation providing for fiscal stimulus through individual tax rebates and measures aimed at encouraging small businesses to invest.

Lawmakers voted 385 to 35 in favor of the USD146 billion package, which contains three major items: tax rebates for working families (the bulk of the USD146 billion package); temporary enhanced small business expensing; and a temporary bonus depreciation for businesses.

Tax rebate provisions:

The package provides lower-income and middle income working families with a tax rebate in an amount equal to the lesser of their net income tax liability or USD600 (USD1,200 in the case of married couples filing a joint return). In the case of taxpayers with earned income of at least USD3,000 and taxpayers with positive income tax liability, this tax rebate will not be less than USD300 (USD600 in the case of married couples filing a joint return). The amount of the tax rebate will be increased by USD300 for each child under the age of 17. These rebates will be subject to a phase-out for taxpayers with adjusted gross income in excess of USD75,000 (USD150,000 for married couples filing jointly). Residents of possessions of the United States will receive similar rebates.

Temporary Enhanced Small Business Expensing Proposals:

In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers may elect to write-off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. Until the end of 2010, small business taxpayers are allowed to write-off up to USD125,000 (indexed for inflation) of capital expenditures subject to a phase-out once capital expenditures exceed USD500,000 (indexed for inflation). The package would double the amount that small business taxpayers may write-off to USD250,000 for capital expenditures incurred in 2008 and increase the phase-out threshold to USD800,000 in 2008.

Temporary Bonus Depreciation for Businesses:

The package would allow businesses to quickly recover the costs of capital expenditures made in 2008 by allowing these businesses to write-off fifty percent of the cost of depreciable property (e.g., equipment, tractors, computers) acquired in 2008. In subsequent years, businesses will continue to depreciate the remaining cost of depreciable property under the current law-depreciation schedule.

The onus now falls onto the Senate, which is considering its own, and more expensive, set of fiscal stimulus proposals, and is also scheduled to vote on them this week.

Speaking from the White House, President Bush congratulated the House for passing legislation that broadly sticks to the principles outlined by the administration for fiscal stimulus, and urged the Senate to put aside party politics and approve the House proposals.

"The temptation is going to be for the Senate to load it up," he observed, concluding:

"My concern is that we need to get this bill out of the Senate and on my desk so the checks can get in the hands of our consumers, and our businesses can be assured of the incentives necessary to make investments."

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