Obama proposes massive tax cuts as part of stimulus plan
05 Jan 2009
US President-elect Barack Obama and congressional Democrats are crafting a plan to offer about $300 billion in tax cuts to individuals and businesses, a move aimed at attracting Republican support for an economic-stimulus package and prodding companies to create jobs. (See: Bush spurs global action as Obama sets agenda for US)
The size of the proposed tax cuts - which would account for about 40 per cent of a stimulus package that could reach $775 billion over two years - is greater than many on both sides of the aisle in Congress had anticipated. The cut includes credits of up to $500 for individuals and $1000 for couples, costing roughly $150 billion. The package will also include more than $100 billion in tax incentives for businesses to create jobs and invest in equipment or factories.
''We're working with Congress to develop a tax-cut package based on a simple principle: What will have the biggest and most immediate impact on creating private-sector jobs and strengthening the middle class?'' transition-team spokeswoman Stephanie Cutter was quoted as saying by The Wall Street Journal. ''We're guided by what works, not by any ideology or special interests,'' she said.
The change would come by altering tax-withholding rules, rather than through a rebate check as with the previous stimulus plan enacted last year, so that workers would see an immediate increase in their take-home pay. The $500 tax credit would apply to the first $8,100 of wages, meaning a worker who earns $24,400 a year and is paid twice a month would get about $60 extra per paycheck for four months.
For businesses, an Obama aide said, lawmakers will use measures similar to those in past stimulus bills, such as allowing companies to get refunds for taxes paid in any or all of the last five years by deducting losses they've incurred now; those losses can currently only be carried back two years.
Congress is also likely to include incentives such as accelerated depreciation to encourage companies to buy equipment now rather than defer such investments. The plan also attempts to combat joblessness by offering companies tax breaks for hiring more workers, the aide said.
Obama will use his public events this week to promise what one adviser called ''radical reforms'' to impose more control over the regular federal budget down the road. Among other areas, the president-elect will focus on changing Pentagon contracting and aid to corporate America, advisers said. He will also designate a chief performance officer and a chief technology officer on Wednesday to help make government more efficient, they said. (See: Obama looking to appoint first chief technology officer for US)
