House leaders and the Bush administration earlier this month reached a deal on how to deliver an economic stimulus package to help jump-start the sluggish U.S. economy. The $146 billion agreement includes tax rebates for individuals, tax cuts for businesses and help for American homeowners. The stimulus plan now moves to the Senate, where leaders there seem intent on making some changes.
The head of the Senate Finance Committee challenged the agreement worked out by House leaders and the president with a $158 billion counteroffer. The move dashed hopes Bush had for moving his stimulus proposal quickly through Congress and to his desk.
Here, read about what happens next and when you might see a rebate check in your mailbox.
What kind of tax rebates would individuals get under the House bill?
House leaders and the White House have agreed to tax rebates worth more than $100 billion for individuals and families. The tax rebates would be:
- Up to $600 per person
- Up to $1,200 per couple
- An additional $300 per child
Who would be eligible for a rebate?
Under the agreement worked out by House leaders and President Bush, taxpayers earning less than $75,000 and couples earning less than $150,000 in adjusted gross income for the year would receive a rebate check. To be eligible for the income tax rebate, taxpayers would have to have earned at least $3,000 in 2007.
The agreement expands the scope of President Bush's original stimulus plan, which would have limited tax rebates only to those who pay income tax. The new agreement would provide $28 billion to 35 million families who wouldn't have been eligible under President Bush's original proposal, according to House Democrats.
When could I expect a check in the mail?
It's unclear when a final deal will be reached. Treasury Secretary Henry Paulson says the IRS could begin issuing rebate checks — either electronically or as paper checks — within 60 days of when the economic stimulus package is enacted. The lion's share of the rebates would then be delivered within a 10-week period, according to Paulson. But Paulson warns that the agency will need to focus for two weeks in April on the demands of the regular tax-filing season. If the bill is enacted in mid-February, as many lawmakers hope, then the process would be wrapped up by mid-summer.
What kind of tax cuts would businesses get?
The House package includes tens of billions in tax cuts for corporations.
It would allow all businesses to immediately write off 50 percent of the purchase cost of new plants and other equipment. In addition, small businesses would be permitted to write off other equipment purchases.
Does the deal address the mortgage crisis?
Yes. The House package would temporarily increase the size of mortgage loans — known as the conforming loan limit — that Fannie Mae and Freddie Mac can purchase: from the current $417,000 to a maximum of $729,750. It would also permanently raise the cap on Federal Housing Administration mortgage loans from $367,000 up to $729,750.
Why raise the conforming loan limits?
Supporters say raising the loan limits will deliver lower interest rates to a large number of homebuyers.
Right now, mortgages for more than $417, 000 carry higher interest rates than mortgages below that amount. That's because Fannie Mae and Freddie Mac are not allowed to back loans above that cutoff.
Higher loan limits will make many more homeowners eligible for lower rates, which could translate to savings of hundreds of dollars each month for those in high-cost areas of the country.
But some critics warn that higher loans limits will merely result in more — and bigger — bad loans being bought up by government agencies. And that means that when these loans go bad, taxpayers will be left holding the bag.
What's in the Senate version?
The proposal from Senate Finance Committee Chairman Max Baucus (D-MT) includes tax rebates and business tax cuts. It would also offer 13 weeks of additional unemployment insurance, a proposal that House Democrats dropped during negotiations with President Bush.
Under Baucus' plan, the tax rebates would be:
- Up to $500 per person
- Up to $1,000 per couple
- An additional $300 per child
Unlike the House bill, Americans receiving Social Security benefits would receive rebate checks.
Baucus' proposal also includes business tax cuts similar to those offered by the House, but he would also allow companies to write off losses going back five years.
What happens next?
The deal struck among Democratic and Republican House leaders and the White House was a major political breakthrough. However, now that the Senate has laid down its initial counteroffer, a conference between the House and Senate will be required to negotiate what is likely to be a delicate compromise.
But before it can even get there, it needs to pass the Senate, and lawmakers have made clear they have a long wish list that includes proposals to increase food stamps, provide heating assistance for low-income Americans and increase spending on infrastructure projects. What's more, the Senate bill stalled on Wednesday after leaders failed to muster the votes necessary to begin debating it.
President Bush has repeatedly warned the Senate against "loading" up the bill because it would mean slowing down the effort to jump-start the economy.
The Associated Press contributed to this report.