Oh, it’s going to be a long January…
President Elect Barack Obama has proposed tax cuts for individuals and small businesses as part of his massive economic stimulus package. The price tag on the cuts? About $300 billion. With a b.
Don’t get too excited just yet. These are just proposed cuts. There’s a lot to hammer out first – not the least of which is that Congress is just now being seated (Minnesota and Illinois notwithstanding) for the new year. And there’s that little detail of Obama not yet being the sitting President…
So take these proposals for what they are: a quick wish list. We’ll see what shakes out in the next few weeks.
But for now, here’s what’s being considered:
Tax cuts for working folks. The tax cuts that are being considered would equal $500 a year for working individuals and $1,000 for working couples. The cuts would be in the form of a payroll tax credit. That’s good news for workers because it’s an immediate benefit – no wait for IRS checks. Employers will make the adjustment during the year by reducing federal tax withholding; workers not subject to withholding will likely be able to apply for a refund at the end of the tax year. And yes, there will likely be phaseouts and caps – meaning at an as yet unmentioned income level, the credits would be reduced or not apply. Whispers are that the income level cap will be around $200,000 but don’t hold me to it.
Business tax breaks. Okay, tax break is a strong word. What’s actually being considered is extending the net operating loss (NOL) carryback to five years (from the current two year limit). That means that businesses that have a bad year or two now can use those losses to offset tax burdens from other years.
Obama would also extend the increase in Section 179 deductions (more or less, immediate tax deductions as opposed to writing them off over a period of time) for small businesses through at least 2010. The limit has been $125,000 but was doubled for one year as part of the Economic Stimulus Act of 2008. The proposal would extend the $250,000 limit for 2009 and 2010.
Finally, to stem off rising unemployment, businesses that create jobs here in the US or avoid future layoffs would receive a tax credit.
So, it’s a lot. Is it too much? Is it enough? Will it stimulate the economy? Or just throw money away. I suspect these questions will be debated for weeks now. But what are you waiting for? Chime in now. Vote in our poll (psst, feed readers, you can’t see it unless you click onto the site) and then tell us what you really think!