Consumers to get tax rebate cheques as part of stimulus package
WASHINGTON -- U.S. President George. W. Bush and congressional leaders agreed yesterday on a $150-billion (U.S.) package of family tax rebates and business incentives meant to ward off a recession in the world's largest economy.
The deal provides for tax rebates of up to $600 for individuals and $1,200 for married couples. Families with children would receive an additional $300 per child.
The deal marked a rare show of co-operation between the President and the Democratic-led Congress who want to pump money into the softening economy in hopes of countering the blow from a mortgage crisis, credit crunch and a surge in oil prices.
"This package has the right set of policies and is the right size," Mr. Bush said.
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But Speaker of the House Nancy Pelosi suggested Democrats might propose additional legislation if the stimulus package fails to spur the economy.
"I can't say that I'm totally pleased with the package," she said. "But ... I do know that it will help stimulate the economy, and if it does not then there will be more to come."
The proposal could undergo some changes when it reaches the Senate, where its price tag could climb even higher than the current $150-billion, which is about 1 per cent of U.S. gross domestic product.
Senate Majority Leader Harry Reid said he hoped the plan could be sent to Bush's desk to be signed by mid-February.
But Mr. Reid held open the possibility of additions to the bill. "We're going to take another look at it when it comes here [to the Senate]," he said.
The plan also includes provisions aimed at shoring up the battered housing market by boosting the size of 'conforming mortgages' to nearly $730,000 that can be financed by housing giants Fannie Mae and Freddie Mac. This would lower the interest rates on these high-cost loans.
The rebate plan would phase out for higher income people - individuals making more than $75,000 in adjusted gross income and married couples making more than $150,000. For every $1,000 over those income levels, the rebates would be reduced by 5 per cent.
One issue of contention was whether low-income people who don't earn enough to owe taxes would also receive the cash. Under the package, workers who reported income of at least $3,000 last year and paid no income taxes would be eligible for a cheque of $300 for individuals and up to $600 for married couples.
The package includes incentives for businesses to make new equipment purchases and other investments. Businesses would be able to immediately deduct 50 per cent of the costs.
Furthermore, businesses would be able to write off more of their current losses against previous tax years.
Fears of a U.S. recession prompted a worldwide selloff in financial markets this week. But expectations of a stimulus package and an emergency interest rate cut of three-quarters of a percentage point by the U.S. Federal Reserve on Tuesday appear to have helped soothe the markets.
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THE RESCUE PACKAGE
U.S. Congressional leaders have a tentative deal for an economic stimulus package.
WHAT'S IN
Tax rebates: Cheques of at least $300 (U.S.) for almost everyone earning a paycheque. Families with children would receive an additional $300 per child. Rebates will be capped at $1,200 for couples with children. They would be limited to people earning below a certain income cap, likely $75,000 for individuals and $150,000 for couples.
Business tax writeoffs: Spurring business investments with so-called bonus depreciation and more generous expensing rules.
Housing rescue: Allowing housing finance firms Fannie Mae and Freddie Mac to buy loans larger than $417,000.
WHAT'S OUT
Permanent tax cuts: Republicans conceded this would have to be left out.
Unemployment insurance: Democrats wanted to extend benefits past 26 weeks.
Medicaid: Democrats gave up on including payments to states.
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