The broad outlines of President-elect Barack Obama’s economic stimulus package that were rolled out over the weekend are startling in one respect. Obama is proposing more money in tax cuts for individuals and businesses over the next two years than President George W. Bush achieved with either of his famous cuts.
Obama is proposing $300 billion in tax cuts over two years, roughly 40 percent of his total stimulus package. Bush’s 2003 tax package resulted in $231 billion in cuts over two years, more than the cuts he got passed in 2001.
Obama’s individual cuts are aimed more at lower-income taxpayers than some of Bush’s cuts. The provisions were discussed during his campaign speeches. He wants $500 in cuts for most working individuals and $1,000 for couples. On the campaign stump, he said those cuts would be available for households making less than $200,000 a year, but Obama aides now say a specific income cap hasn’t been set.
The far greater surprise in Obama’s latest stimulus package is the number of tax credits and cuts for businesses, totalling roughly $100 billion, according to his economic team.
They include allowing firms that suffered losses last year to take a credit against profits dating back five years, instead of the two years currently allowed. There would also be a tax credit for companies that hire new employees or forgo planned layoffs, and there would be a broader range of write-offs and credits available for small businesses.
Obama hasn’t abandoned the spending side of his stimulus plan. He still wants federal money to double renewable energy production and make public buildings more efficient. He plans substantially more spending on roads and bridges. He would like to computerize the health-care system and modernize classrooms and libraries.
Of those, spending on roads and bridges — which creates jobs and improves infrastructure needed for commerce — is the most likely to have a strong immediate impact on the economy.
But it is welcome news that Obama recognizes the importance of cutting taxes, including on
businesses — not just spending federal funds — as a critical factor in getting the economy back on track.