President-elect Barack Obama and his transition team reportedly plan to propose approximately $300 billion in tax cuts as part of an overall economic stimulus package.
The size and makeup of both the tax cuts and stimulus package are still being worked out, but Obama is said to be looking at an overall stimulus package of about $775 billion, much of it devoted to "shovel-ready" infrastructure projects and renewable energy development. To make the package more palatable to Republicans who have signaled their opposition to earmarks and wasteful spending, the Obama team plans to make tax cuts a large component of the overall package.
The package would likely include both personal and business tax cuts. During his campaign, Obama had proposed a "Making Work Pay" tax credit of $500 per individual and $1,000 per family. The business tax cuts might include a proposal to let companies write off their tax losses for 2008 and 2009 to retroactively cut their tax bills for the past five years, according to The Wall Street Journal. The package could also include tax credits for companies that hire new workers or skip planned layoffs.
"It's a more moderate approach than what he's communicated before," said Peter Iannone, a director at accounting provider CBIZ. "Before, he's talked about tax cuts for individuals and tax cuts for the lower end of the income spectrum. He's heard the message that this needs to be extended to businesses as well, due to the severity of the problems in our economy."
Iannone agrees with Republican congressional leaders who are concerned that the stimulus package could lead to "unbridled spending."
"Granted, these are moves to stimulate the economy, but you don't want to turn this into inflation," he said. He believes the package could include accelerated cost recovery and accelerated depreciation provisions for capital investments, in addition to job creation credits for employers.
