Tax News

CCH (cch.taxgroup.com) reports:

  Calling it an investment in America's future, House Democratic leaders successfully passed the American Recovery and Reinvestment Bill of 2009 (HR 1) on January 28. The party-line vote of 244 to 188 came at the end of a day-long legislative session in which GOP lawmakers sought to portray the measure as an ineffective, tax-and-spend liberal package that would do little to help end the U.S. recession, create jobs or help struggling families. The House action was the latest step in an effort to get economic stimulus legislation to President Obama's desk before the Presidents Day recess in mid-February. The Senate is expected to shortly vote on its version of the legislation, which includes different tax provisions and might win more GOP support.

  The centerpiece of the tax provisions in the House's $825 billion bill is the Making Work Pay tax credit, which would provide a $145.3 billion refundable credit to families and individuals in their paychecks. The provision, which GOP lawmakers wanted to replace with targeted tax incentives and a cut in marginal tax rates, was intended to help middle-income taxpayers who did not benefit from the tax policies supported by former President Bush in the last eight years, Democrats charged. Congress is saying, in effect, that trickle-down economics has not worked, said Rep. John Lewis, D-Ga., who is a member of the House Ways and Means Committee. "We are saying that the people's resources should be used to benefit the greatest number of citizens in their time of need," he added.

  Eleven Democrats voted against the bill. The measure ran into trouble with the conservative House Democratic Blue Dog Coalition, which favors following pay-as-you-go (PAYGO) budget rules as a way to shrink the budget deficit. Rep. Charlie Melancon, D-La., said he voted for the measure following a commitment by the Obama administration that it will support efforts to follow PAYGO rules.

  Democrats soundly defeated an alternative proposal from Ways and Means ranking member Dave Camp, R-Mich., and Rep. Tom Price, R-Ga. GOP lawmakers said they raised their concerns about HR 1 with Obama, but the bill still includes unnecessary federal spending. "The bulk of the tax cuts are simply rebate checks --$10 a week for individuals and $20 a week for couples. We tried rebate checks last year and they simply don't work," said Ways and Means member Paul Ryan, R-Wis.

  President Obama said he was grateful for the House vote on the economic package but hopes the Senate will "strengthen" the plan before it reaches his desk. Obama said the House package will provide "billions of dollars of immediate tax relief "to working families and save or create 3 million jobs over the new few years. Obama did not explain what areas of the bill need to be changed but stressed the importance of moving on the package swiftly. Earlier in the day after a meeting with business leaders (TAXDAY, 2009/01/29, W.1), the president said he hoped to sign an economic recovery bill "in the next few weeks."

  By Stephen K. Cooper and Paula Cruickshank, CCH News Staff

American Recovery and Reinvestment Tax Act of 2009, as Reported by the House Ways and Means Committee, HR 598

Ways and Means Press Release: Economic Recovery Plan Passes House of Representatives

Ways and Means Press Release: Ways & Means Democrats Support American Recovery and Reinvestment Plan

White House Press Release: Statement of the President on the House Passage of the American Recovery and Reinvestment Act

SFC Press Release: Finance Panel Votes to Create Jobs, Cut Taxes for Working Families and Small Businesses in Economic Recovery Plan