The Senate voted Thursday for an economic stimulus package that adds retirees and disabled veterans to a House-passed version of the bill. "I am glad the stimulus package was substantially improved by adding help for 20 million seniors on Social Security and 250,000 veterans living on disability benefits. Including seniors and veterans will help people truly in need, and it will help the economy overall. It's the right thing to do," Senator Bernie Sanders said. "I am disappointed, however, that the Republicans filibustered a better package that also included home heating assistance, an extension of unemployment insurance and a tax credit for those involved with wind and solar energy. Our economy is in trouble and I intend to do all I can to bring these measures back up as soon as possible."

Economic Stimulus Act of 2008

February 7, 2008

I. Individual Tax Provisions:

The agreement will provide stimulus checks to more Americans - including 20 million seniors living only on Social Security and 250,000 disabled veterans, as the Senate Finance Committee first proposed. Stimulus checks for the survivors of disabled veterans have been added as well. These Americans are among those most likely to spend stimulus funds quickly - fulfilling the bill's goal of boosting consumer spending and the American economy.

Safeguards proposed by the Finance Committee to ensure that illegal immigrants do not obtain rebates or bonus payments remain in the final agreement as well. Income caps remain at the House-passed level of $75,000 for single taxpayers, $150,000 for joint returns.

I. Individual Tax Provisions: The rebate proposal has two components. The first is an amount based on filing status and income tax liability and the second is an increase in the child tax credit.

• Part 1: Basic Credit
  • The minimum rebate amount is $300 ($600 for married filing jointly). The taxpayer will receive this amount if he has at least $1 of tax liability or $3,000 in qualifying income, defined as the sum of net self employment income, veterans' disability payments (including payments to survivors of disabled veterans), and social security benefits. This payment is refundable, meaning the recipient gets the full amount.

• The maximum rebate amount is $600 ($1,200 for married filing jointly). The taxpayer's rebate under this credit will be equal to the minimum of his tax liability or 10% of the first $6,000 of taxable income ($12,000 if married filing jointly). This credit is not refundable.

• Part 2: Qualifying Child Credit
  • If a taxpayer receives $1 of the income tax rebate and the taxpayer has children, the taxpayer will also receive $300 per child. This payment is refundable, meaning the recipient is entitled to the full child credit without regard to income tax liability.

The amount of the credit (including both the basic credit and the qualifying child credit) is phased out at a rate of 5% of adjusted gross income beginning at $75,000 ($150,000 in the case of joint returns). Residents of the U.S. possessions will also receive the benefit, but the provision denies the basic credit and the qualifying child credit to individuals if the tax return does not include valid identification numbers for all persons listed on the return. A valid identification number is a Social Security Number issued by the Social Security Administration, and does not include a Taxpayer Identification Number issued by the Internal Revenue Service. This proposal is expected to cost approximately $105.7 billion in 2008 and $115.2 billion over ten years.

II. Business Tax Provisions

The compromise legislation retains tax relief for American businesses, in the form of enhanced expensing and depreciation provisions for businesses buying equipment and placing it into service this year. This tax relief will encourage businesses to buy what they need to grow - and the requirement for investment this year will achieve the stimulus bill's goal of injecting money into the economy right away.

Elective Expensing (Section 179). In lieu of depreciation, small business taxpayers may elect to expense the cost of qualified assets (property) they purchase in the year when the assets are placed in service, within certain limits. Under section 179, small business taxpayers are allowed to expense $125,000 (indexed for inflation), and the phase-out threshold is $500,000 (indexed for inflation). Currently in 2008, the expensing limit is $128,000 and the phase-out threshold is 510,000. The proposal increases the expensing limit to $250,000 and the phase-out to $800,000 for 2008. The proposal is effective for taxable year 2008. This proposal is expected to cost $900 million in 2008 and $100 million over ten years.

Bonus Depreciation. Generally a trade or business must recover the cost of property over a predetermined period of years. This proposal will allow a trade or business to depreciate an additional 50 percent of the cost of an asset acquired and placed into service in 2008 in that year. The types of property eligible for bonus depreciation will be the same as those included in the previous depreciation packages: (1) tangible property that had a recovery period not exceeding 20 years; (2) purchased computer software; (3) water utility property; and (4) qualified leasehold improvement property. The bonus depreciation will be allowed under the alternative minimum tax (AMT). The proposal is effective for calendar year 2008 beginning after the date of first Committee action. This proposal is expected to cost $43.9 billion in 2008, and $7.4 billion over ten years.

III. Other Provisions

America's current economic troubles have their roots in the nation's sagging housing sector. The compromise legislation retains House-passed provisions temporarily increasing conforming loan limits for the Federal Housing Authority. These provisions were outside the jurisdiction of the Finance Committee and not included in the Committee's original product, but were included in the original amendment on which the Senate voted Wednesday night.

Raise Loan limits for FHA's Single-Family Program. The proposal would raise FHA's loan limit - the dollar amount of a mortgage that FHA can insure - for its single-family program from 87 percent of the conforming loan amount to as high as 175 percent (effectively $362,790 to $729,750) of the conforming loan limit in certain geographic regions where the cost of housing is very high and from 48 percent to 65 percent (effectively $200,160 to $271,050) of the conforming loan limit in less expensive markets. FHA would also have the authority to raise those loan limits by up to an additional $100,000 if market conditions warrant such increases. The proposal expires on December 31, 2008. The proposal is expected to cost less than $50 million in 2008 and less than $50 million over ten years.