Bush Plan to Feature Tax Rebates, Breaks

Jan 18, 08:13 AM

Jan. 18--WASHINGTON -- The Bush administration is close to completing an economic-stimulus proposal that will include rebates for individuals of anywhere from $300 to $800 as well as tax breaks for businesses, according to a rough sketch of the plan emerging from people familiar with it..

The proposal is subject to revision as administration officials consult with Republican and Democratic lawmakers in Washington, the people said.

President Bush will lay out the "principles" of the economic package today, although it's "too early" to unveil a final proposal, according to his spokesman, who declined to provide details. Congressional leaders say a stimulus package may be as much as $150 billion.

Federal Reserve Chairman Ben Bernanke voiced support for a stimulus package in an appearance before the House Budget Committee but said it had to be quick and temporary.

"Putting money into the hands of households and firms that would spend it in the near term" is a priority, Bernanke told the committee.

The fragile state of the economy has gripped Wall Street and Main Street and is a rising concern among voters. The subprime mortgage crisis and languishing housing recession -- the government said home starts fell at the sharpest pace in 27 years in 2007 -- are dragging down the economy.

The jobless rate rose to 5 percent in December from 4.7 percent a month earlier, and economists at Goldman Sachs, Merrill Lynch and Morgan Stanley say the U.S. is probably sliding into a recession.

The situation has galvanized politicians -- including those vying to be the next president -- and poses the biggest test to Bernanke, who took over the Fed nearly two years ago. Bernanke said U.S. economic growth was slowing but did not predict a recession this year.

The president told congressional leaders privately Thursday that he favors a combination of income-tax rebates for individuals and tax breaks for businesses to help avert a recession, officials said.

The plan the administration is close to proposing includes a temporary elimination of the bottom tax rate, now 10 percent, and a consequent lump-sum rebate to all taxpayers, according to the people familiar with the plan.

Businesses would get a tax break that would allow them to deduct 50 percent of the price of new equipment they purchase this year. Small businesses would be able to deduct as much as $200,000 in new equipment purchases, up from the current $112,000 limit.

Bush spoke with congressional leaders as top House aides worked on an economic rescue package that included more money for food-stamp recipients and the unemployed as well as tax rebates and cuts.

Lawmakers and aides involved in the talks said the White House is pressing for tax rebates of $800 for individuals and $1,600 for married couples. Lawmakers were likely to settle on a $500 rebate for individuals, said an aide involved in the talks, with details for couples and people with children still being negotiated.

The rebates would probably be limited to individuals with incomes of $85,000 or less and couples with incomes of $110,000 or less, the aide said, speaking on condition of anonymity because no final decisions had been made.

Bush plans to talk about his criteria for the program at the White House this morning and later in the day in a speech at a manufacturing plant in Frederick, Md.

One official said the president did not push for a permanent extension of his 2001 and 2003 tax cuts, many of which are scheduled to expire in 2010. That would eliminate a potential stumbling block to swift action by Congress, because most Democrats oppose making the tax cuts permanent.

In his committee appearance, Bernanke said a stimulus package should be designed to quickly get cash into the hands of people, especially those with low and moderate incomes.

Bush wasn't going give specifics in his remarks but instead demand that any package be effective, simple and temporary, White House press secretary Dana Perino said.

Perino said the conference call showed that both parties basically were in agreement that they needed to do something, and that they needed to cooperate and that it needed to happen quickly.

Perino said that Bush and congressional leaders from both parties consulted via conference call Thursday for about 30 minutes. House Speaker Nancy Pelosi, D-Calif., has talked of a package totaling $100 billion or more.

Although Republicans and Democrats differ over what provisions should be part of any economic-stimulus package, there is widespread agreement that tax rebates along the lines of the $300-$600 checks provided in 2001, when the country last suffered a recession, are likely to be part of the measure. It's also likely that unemployment benefits will be extended.

STOCK MARKET

-306.95 Dow Jones industrials Thursday; average off 8.3 percent this year.

MANUFACTURING

-20.9 Philadelphia Fed manufacturing index, sharpest drop since October 2001

NEW HOMES

-24.8% 2007 home starts, worst drop since 1980

OIL PRICES

$90.13 Crude oil, lowest price per barrel since Dec. 11

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