US Administration Returns To Tax Incentive Agenda

by Mike Godfrey, Tax-News.com, New York

26 September 2001

With some semblance of normality beginning to return to the Washington legislative process, attention is being paid once more to the possibility of further economic stimulus as surveys confirm that the economy may be taking a serious blow from slumping consumer confidence.

The administration's plans are being drawn up under the aegis of the Domestic Consequence Group, a White House policy working group chaired by deputy chief of staff Josh Bolten, and which includes senior economic advisers such as Lawrence Lindsey and Glen Hubbard.

There is no unanimity that further stimulus is needed at this time: Deputy Managing Director of the IMF, Anne Krueger, echoed Alan Greenspan in saying yesterday that policymakers should wait for a clearer picture of the economic outlook in the wake of the terrorist attacks before taking further action.

Straight reductions in capital gains tax are no longer the front-runner for Congressional action; instead, a bi-partisan group of senators, including Jon Kyl, an Arizona Republican, and Robert Torricelli, a New Jersey Democrat, are suggesting an increase in allowable capital loss deductions to $10,000 from the current $3,000 as a way of helping investors who have lost out massively in the high-tech implosion, as well as from recent across-the-board Wall Street falls.

The Domestic Consequence Group is also focussing on reviving the 'faith-based initiative'. This program, designed to boost government support for religious charities, had been frozen in the Senate over constitutional objections, but now looks less difficult, especially if the most controversial element of the package, the "charitable choice" provisions that would allow government-funded charities to keep more of their religious components, are deferred, with the more popular element of the legislation - tax credits to spur charitable giving - moving quickly through Congress.

Either way, say administration officials, the surge in charitable giving after the attacks on the World Trade Center and the Pentagon "has given a new focus" to the issue. Reaching a deal before Congress recesses is "not out of the realm of possibility." In the Senate, Joseph I. Lieberman (D-Conn.) is thought to believe that there would be "a lot of support on both sides of the aisle" to move ahead quickly on the tax credit components of the legislation.

Recommended