Senate Tax Writers Approve Economic Stimulus Plan

by Mike Godfrey, Tax-News.com, Washington

01 February 2008

The Senate Finance Committee has approved an alternative economic stimulus plan authored by its Chairman, Senator Max Baucus, that goes further than the provisions voted for by the House of Representatives by offering tax rebates to seniors and disabled veterans, and modifying business tax relief for struggling businesses.

The Senate Finance Committee voted 14 to 7 in favor of delivering USD500 tax rebates to more than 20 million American seniors as part of an economic stimulus package. The Baucus legislation, which is slated for immediate consideration by the full Senate, claims that it will boost the American economy with rebates for every American reporting USD3,000 in wages, Social Security income, or net self-employment income on a 2007 tax return. That rebate will double for married taxpayers filing jointly, and families will receive an additional USD300 for every qualifying child under age 17. Baucus has also added a measure to make the same rebates available to disabled veterans who may not otherwise qualify.

The Baucus legislation also extends Federal unemployment insurance benefits for 13 weeks in all states through December 2008, and provides for an additional 13 weeks of benefits in states meeting certain criteria for high unemployment.

Additional business tax relief will allow companies losing money in the economic downturn to access quick cash for payroll and expenses. This includes a provision allowing corporations to apply excess net operating losses to tax returns from prior profitable years and receive any applicable refunds. For 2006 and 2007 losses, the “net operating loss (NOL) carryback” would be extended to five years (back to 2002 and 2001) from the two years currently in law. Measures to prevent companies from abusing the intent of the provision were added at markup.

The Chairman’s Mark also expands Section 179 expensing of equipment for small businesses, and bonus depreciation for business property that is purchased and placed into service by large companies during 2008, similar to the House-Administration proposal. However, unlike the House bill, the effective date for the Section 179 expensing enhancement is Fiscal Year 2008. Companies eligible for the 50% bonus depreciation for property purchased and placed into service this year will receive 25% bonus depreciation in 2008, and 25% in 2009.

Baucus's plan is about USD40 billion more expensive than the package passed by the House earlier this week, and the Senate Finance Chairman is under increasing pressure from the White House and Congressional colleagues to drop his version and pass the Bush-sanctioned House bill.

Baucus however, remains defiant in the face of this criticism, arguing that: “America’s seniors have worked hard all their lives, paid taxes all their lives, and they contribute to our economy today. This package will put rebates into the hands of 20 million additional American seniors, plus lower-income payroll taxpayers and disabled veterans – all of whom will spend this money quickly and give our economy the shot in the arm that it needs."

"I’ve worked hard with my colleagues to improve on the House stimulus proposal and move a bill quickly. Congress should seize with both hands this chance to make 20 million American seniors a part of our economic stimulus efforts today, and get our country growing again," he concluded.

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