Barack Obama has exclaimed that, "The economy is very sick, The situation is getting worse. ... We have to act and act now to break the momentum of this recession."
As a result, tax cuts are the first surprise from the Obama administration in 2009. The proposed "Tax increases for the rich" were tabled a short while ago, and now tax cuts are reverberating throughout Washington as a result of the U.S. economy. This comes as quite a surprise to many Republicans, as they are typically known for their tax cutting policies.
While Democrats in Congress have mainly talked up spending on infrastructure, social programs and aid to states, the incoming administration pulled some pages from the GOP playbook.
In addition to $150 billion in individual tax cuts, the Obama team is said to have embraced two business tax breaks promoted by House Republican Leader John Boehner.
Here are the non-partisan facts about the tax cuts:
Obama's proposal to stimulate the economy includes tax cuts of up to $300 billion — including $500 for most individuals and $1,000 for couples if one spouse is employed — as well as more than $100 billion for businesses, an Obama transition official said. The total value of the tax cuts would be significantly higher than had been signaled earlier.
New federal spending, also aimed at boosting the floundering economy, could push the overall package to the range of $800 billion or so. Some $77 billion would be used to extend unemployment benefits and to subsidize health care for people who have lost their jobs.
The rest would go toward job-creation projects such as roads and bridges and toward long-term goals such as alternative energy programs.
The Obama plan's tax cuts for individuals and couples would be a bit different from the rebate checks sent out last year by the Bush administration and Congress in a bid to boost the slowing economy. The relief this time around would be awarded by withholding less from worker paychecks. That provision would cost about $140-150 billion over two years.
For businesses, the plan would allow firms incurring losses last year to take a credit against profits dating back five years instead of the two years currently allowed.
Another provision brought to the negotiations by the Obama team would award a one-year tax credit costing $40-50 billion to companies that hire new workers, and would provide other incentives for business investment in new equipment.
All of these developments have definitely caught my eye. I for one, am a proponent of rewarding business by more favorable taxation policies. However, like so many programs enacted over the previous 4 months, I tend to wonder where all of this money is coming from? After all, last time I checked, it still doesn't grow on trees.
