January 25, 2008

Economic stimulus package announced

Legislation updates provided by Rob Smith, Ceridian manager of Government Relations

Economic stimulus package announced
On January 24, House of Representatives leaders and the White House formally announced an economic stimulus plan that, if successful, will provide 117 million Americans with a check from the U.S. Treasury. Congress and the White House are hopeful that the package will be enough to correct course for an economy that is tipping toward a recession on a wave of financial downturn caused by the ongoing mortgage crisis.

The $150 billion plan was brokered by Speaker of the House Nancy Pelosi, House Minority Leader John Boehner and Treasury Secretary Henry Paulson. The U.S. Constitution requires that revenue measures must first be approved by the House of Representatives, so the Senate leadership deferred to the House to develop the initial economic stimulus measure.

Checks in the mail?
Under the plan, all individual taxpayers who filed income taxes would receive a U.S. Treasury check for $600, and married couples would receive $1,200. Workers who make at least $3,000 but don't pay taxes would get $300 rebates. People in both groups with children would receive an additional $300 per child.

The rebates would be gradually phased out for individuals whose income is $75,000 or less and working couples with incomes $150,000 or less, with the rebate dropping $5 for every $100 taxpayers make over the income thresholds. Contributions to 401(k) or IRA retirement accounts and health savings accounts would not be counted as income.

Help for small businesses and mortgage market planned
The bill would also provide significant tax breaks to small businesses. While details aren't yet available, small businesses would be able to write off $250,000 worth of expenses -- up from the current $125,000 limit -- and could deduct an additional 50 percent of the cost of certain investments.

Also, the plan aims to help ease mortgage market troubles by increasing the mortgage dollar amount government-sponsored Freddie Mac and Fannie May can guarantee from $417,000 to $600,000.

The plan isn't set in stone yet, but the House leadership plans to introduce the legislation as early as next week, when it is expected to be swiftly approved.

Senate under pressure to approve as is
The future looks a little rockier in the Senate. Although the Senate chose to defer to the House for the bill's initial drafting, key Senators, such as Senate Finance Committee Chair Max Baucus and Senate Health, Education and Labor Chairman Edward Kennedy, have promised to add other provisions including raising food stamp benefits and extending unemployment benefits for workers whose benefits have run out. Both Republicans and Democrats had to give up a lot to arrive at a compromise in the House, so any action by the Senate to add to the package could fatally damage the already fragile agreement.

However, 2008 is an election year, and the Senate will be under great pressure from the House of Representatives and the White House to pass the stimulus measure as fast as possible, so we could very likely see the bill signed into law by the end of February. The IRS needs until May to finish processing the 2007 tax returns, so, if the Senate approves the package quickly, taxpayers could start receiving their stimulus checks as early as June.

Ceridian will continue to update this information as the economic stimulus packages progresses through Congress, so be sure to check back often.