Daily Tax Update - January 5, 2009

CONGRESSIONAL ACTION ON STIMULUS PLAN LIKELY TO BE DELAYED UNTIL MID- FEBRUARY:  The new stimulus package under development by President-elect Obama and Congressional Democrats is expected to be in the $675 billion to $775 billion range or higher over two years. The plan is expected to contain about $300 billion in tax cuts for individuals and businesses and perhaps as much as $500 billion in spending. 

  • Today, President-elect Obama visited with Congressional Democrats to discuss his stimulus plan, and he is expected to make a major speech on Thursday outlining the objectives of his plan. At today’s meeting with House Speaker Nancy Pelosi, Obama said, “The reason we are here today is because the people can't wait. We have an extraordinary economic challenge ahead of us. We are expecting a sobering job report at the end of the week.” Obama added, “This is not a Republican problem or a Democratic problem at this stage. It is an American problem and we're going to all have to chip in and do what the American people expect.” As far as the timing for the stimulus plan, Obama said, “I expect to be able to sign a bill shortly after taking office...By the end of January or the first of February.”
  • Meanwhile, the timetable for action on the plan has been slowed several weeks as Democrats and Obama Administration officials try to devise the most effective components to help jumpstart the economy. Congressional Democrats said last week that they hoped to pass a stimulus package and have it enacted by President-elect Obama’s January 20th inauguration. However, Senate Majority Leader Harry Reid said yesterday that he rejected setting “some false deadline” for passing the new stimulus package and said that he favors getting it right “the first time.” 
  • Yesterday, House Majority Leader Steny Hoyer concurred, “It’s going to be very difficult to get the package put together that early so that it can have sufficient time to be reviewed, and then sufficient time to be debated and passed.” Hoyer continued, “We certainly want to see this package passed through the House of Representatives no later than the end of this month, get it over to the Senate, and have it to the president before we break for the presidential break.” Hoyer added, “We have two criteria: Do it as quickly as possible, but do it right.”
  • The new stimulus package is expected to contain about 40 percent (about $270 billion to $310 billion) for tax breaks and approximately $100 billion in tax incentives for businesses to help create jobs and invest in equipment. About $150 billion will be offered in tax credits or rebates of up to $500 per worker to help stimulate consumer spending. Among the business tax breaks designed to invigorate capital investment is a provision that would allow businesses to apply net operating losses from last year to offset tax liabilities from prior years.
  • Senate Minority Leader Mitch McConnell said yesterday, “This is an enormous bill. It could be close to a $1 trillion spending bill. Do we want to do it with essentially no hearings, no input, for example, in the Senate from Republican senators who represent half of the American population? I don't think that's a good idea.”

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