Here's the Plan: Checks in the Spring

Jan 25, 07:37 AM

WASHINGTON

House leaders and the Bush administration reached agreement Thursday on a $150 billion economic stimulus package that would send hundreds of dollars to poor and middle-class workers while offering businesses one-time incentives to invest in new equipment.

The deal, announced by House leaders and President Bush after late-night negotiations, was a work of compromise, and there is more work ahead in the Senate. House Speaker Nancy Pelosi, D-Calif., acceded to Republican demands, jettisoning plans to extend unemployment benefits and food stamps for now but concluding that the issue could be revisited if the economy continues to slide.

"I can't say that I'm totally pleased with the package, but I do know that it will help stimulate the economy," Pelosi said. "And if it does not, then there will be more to come."

House Minority Leader John Boehner, R-Ohio, agreed to offer $28 billion in cash payments to 35 million working families that earn too little to pay income tax, an idea that GOP leaders had roundly rejected in past stimulus plans.

"This was not easy," Boehner said.

In return, the deal includes provisions authored by Boehner that would allow faster tax write-offs for corporate investment and immediate tax deductions for small-business investment in plants and equipment.

Under the deal, nearly everyone who earned a paycheck in 2007 would receive at least $300 from the Internal Revenue Service - $103 billion in total. Most people would receive rebates of $600 each, or $1,200 per couple. Families with children would receive an additional payment of $300 per child. Workers who earned at least $3,000 last year - but not enough to pay income taxes - would be eligible for $300.

The first cash payments would arrive no earlier than May, and most of the payments would be in workers' pockets within 10 weeks of the first payouts.

Overall, 117 million families would receive rebate checks, including the 35 million with earnings too low to have qualified under an earlier Bush proposal that limited checks to income tax payers. Rebates would be limited, however, to single taxpayers who earned up to $75,000 or couples with incomes of as much as $150,000. Above that, the benefit would phase out until it is completely gone for individuals with adjusted gross incomes of roughly $87,000 and couples who earned $174,000.

Whether the measure will stabilize a jittery economy was the subject of debate. Bernard Baumohl, managing director of the Economic Outlook Group, said the package - and the emergence of brief bipartisan comity after so many months of partisan infighting - would have a positive psychological impact on markets and investors.

But he cautioned that "practically speaking, this plan is not expected to have any meaningful impact on the economy until much later this year, perhaps in the fourth quarter. Even then, it's unlikely we'll see more than an extra blip in GDP growth."

The money would be borrowed and will increase the federal deficit.

To address the underlying economic issue of the housing slump, the deal would expand the Federal Housing Administration's ability to insure higher-priced mortgages and to help homeowners threatened by foreclosure renegotiate their loans without sharp increases in their payments.

The package would temporarily increase the size of jumbo mortgages that can be bought by government-sponsored Fannie Mae and Freddie Mac, from $417,000 to as much as $729,750 in high-cost housing markets.

The package also includes close to $50 billion in business tax cuts.

Treasury Secretary Henry Paulson conceded that the deal may be far from final passage. Pelosi dropped some key demands to keep it tilted toward the middle class and to include the working poor.

"The Senate will want to speak as well," Senate Finance Committee Chairman Max Baucus, D-Mont., said Thursday morning as he announced that his committee would draft its own stimulus bill next week.

Baucus said he would like to increase the size of tax payments for the working poor and restore unemployment benefit extensions dropped by Pelosi and Boehner.

Details of the plan:

1. Tax rebates for workers: Some 117 million Americans would get checks. They would get the greater amount as computed in one of two ways:

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Those who paid income tax in 2007 would get one-time payments of 10 percent of the first $6,000 of taxable income ($12,000 if married filing jointly) for maximum checks of $600 ($1,200 if married filing jointly).

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Those who earned at least $3,000 last year, including those who earned too little to pay income taxes, would get $300 for individuals or $600 for couples.

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Workers who qualify for rebates also would receive $300 rebates per child, with no cap on the number of children.

The rebates would be sent by check, and there would be no need to apply. They would be sent automatically.

2. Tax benefits for employers:

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A 50 percent bonus depreciation on new equipment in the year it's placed in service, with some exceptions.

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Section 179 expensing, allowing employers to fully expense $250,000 in new and used tangible property in the year it's purchased, up to an overall investment limit of $800,000.

3. Housing:

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A one-year increase in Fannie Mae and Freddie Mac conforming loan limits to $729,750 from $417,000 and a permanent increase in Federal Housing Administration loan limits to $729,750 from $362,790.

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Other changes would help people who are facing foreclosure to refinance their loans and get housing counseling.

This story was compiled from reports by The Washington Post, McClatchy News Service and The Associated Press.

the details money in the mail

Most tax filers would get checks for $600, or $1,200 per couple, by spring. The amount would be higher for families with children. About two-thirds of the relief would go out in checks to 117 million families beginning in May. what's next

The bill will go to the House next week and on to the Senate, where some Democrats hope to add elements such as extended unemployment benefits. for businesses

The deal would allow tax write-offs for corporate investment and deductions for small businesses to invest in new equipment. housing help

The plan would allow more subprime mortgage holders to refinance into federally insured loans. See examples of how it could affect you on Page 6. who would benefit

How Americans in different financial situations would fare under the proposal from House leaders and the White House.

An individual with $2,500 in earned income in 2007 would be disqualified because income fell below the $3,000 threshold. No rebate.

A married couple with no children, with adjusted gross income of $100,000 in 2007, would qualify for the full $1,200 for couples. A $1,200 rebate.

A worker who has one child, earned $9,000 and owed no taxes in 2007 would qualify for the $300 rebate available to individuals who pay no taxes but earned at least $3,000, plus an additional $300 for the child. A $600 rebate.

A couple with three children and with income of $145,000 in 2007 would qualify for the full $1,200 for couples, plus $300 for each child. A $2,100 rebate.

A couple with income of $160,000 in 2007 and two children would qualify for a rebate, but reduced by 5 percent for every $1,000 in income above the $150,000 threshold. An $1,800 rebate - $1,200 for the couple plus $300 per child - would go down by 50 percent for this family. A $900 rebate.

A couple with income of $200,000 and four children would be disqualified because their income exceeded $174,000, the phase-out limit.

An individual with adjusted gross income of $23,000 and no dependents would get a rebate of $600.

(c) 2008 Virginian - Pilot. Provided by ProQuest Information and Learning. All rights Reserved. Here's the Plan: Checks in the Spring
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