Monday, January 5, 2009

Tax Cuts Coming in the New Stimulus Plan from Barack Obama

The upcoming economic stimulus package to be proposed by President-elect Barack Obama could include very large tax breaks for individuals and businesses, according to Democratic aides. The tax cuts could make up as much as 40% of the stimulus package. The package may be worth as much as $775 billion meaning tax cuts may constitute more than $300 billion of the legislation.

Making tax cuts such a large part of the stimulus may help win support from Republicans. Senate Minority Leader Mitch McConnell, a Kentucky Republican, said his party would support a middle class tax cut as part of any stimulus package.

The plan would attempt to boost consumer demand by spending $140 billion on tax breaks worth $500 for individuals and $1,000 for couples. The change would come by altering tax-withholding rules, rather than through a rebate check as with the previous stimulus plan enacted last year, so that workers would see an immediate increase in their take-home pay.

The $500 tax credit would apply to the first $8,100 of wages, meaning a worker who earns $24,400 a year and is paid twice a month would get about $60 extra per paycheck for four months.

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