The deal: Billions in rebates

The Baltimore Sun

WASHINGTON -- President Bush and leaders in the House of Representatives agreed yesterday to deliver tax rebate checks to tens of millions of low-wage and middle-income households within weeks, hoping that struggling families spend the windfall quickly and invigorate the nation's economy.

The stimulus plan, drafted during several days of intense negotiations, could send up to $600 to lower-income households without children, while those with two wage-earners and several children could receive more than $2,000.

The proposal also includes temporary preferential tax treatment for businesses and some housing market assistance.

Bush urged quick passage of the program yesterday.

"We have an opportunity to come together and take the swift, decisive action our economy urgently needs," he said.

House leaders from both parties hope the plan receives final approval within a month, allowing checks to arrive in May or June. But the Senate - which was not directly involved in negotiations - could add provisions that might complicate passage.

Senate Majority Leader Harry Reid, a Nevada Democrat, said senators "will work to improve the House package by adding funds for other initiatives that can boost the economy immediately," such as additional unemployment benefits, food-stamp assistance and money for state governments.

Some economists say that money for less-wealthy families, such as food assistance, is spent more quickly and has greater impact than business tax breaks.

The agreement represents an uncommon display of bipartisanship in the nation's capital, where vitriolic disputes have scuttled recent attempts by Democrats and Republicans to reach agreement on immigration, the Iraq war, children's health care and other spending.

But with unemployment rising, the housing market imploding and stocks unpredictably volatile, the White House and lawmakers agreed in the past week that Washington needed to act promptly to provide economic stability.

House Speaker Nancy Pelosi said rapid passage would "help alleviate the economic pain felt by millions of Americans."

"I told the president that I hoped that we can use this model of bipartisanship to work together on unemployment insurance and Medicaid and other issues that spring from a weakened economy," Pelosi said.

If the measures fail to supply an adequate economic jolt, she said, "there will be more to come."

The stock market reacted calmly to the development. The Dow Jones industrial average finished the session up more than 100 points, its second straight gain after several days of big losses.

Under the plan, those with income of at least $3,000 last year but who did not make enough to pay federal taxes would receive a $300 check - $600 for a married couple filing jointly.

Those payments represent a victory for Democrats, who persuaded Republicans to include people who worked but did not pay tax. That group includes 35 million working families, more than half of whom have children, Pelosi's office said.

Most workers - those who will pay at least $600 in federal taxes for 2007 - would receive a $600 rebate if they filed individually and $1,200 if they filed a joint return. Unlike a similar stimulus program in 2001, the money is an outright payment, not an advance or offset against the next year's tax filing.

The rebate checks would be increased by $300 for each dependent child, without limit. That means a couple with four children and taxable income of $100,000 after deductions would receive $2,400. The rebates are not taxable.

Payments would be phased out for individuals with more than $75,000 in taxable income, and joint filers earning more than $150,000.

Bush said the package adhered to principles he laid out last week: that it be simple, temporary and large enough - at about 1 percent of the nation's $14 trillion gross domestic product - to have an effect on the economy.

The government intends to borrow money to cover the roughly $145 billion cost. House leaders agreed to waive rules that require new spending to be matched by additional taxes or cuts elsewhere.

The roughly $42 billion in business tax incentives allow companies to take a one-time bonus deduction of half the cost of new equipment. Officials hope the break leads to more investment and more jobs.

The mortgage component would raise the limits on loans that meet Fannie Mae and Freddie Mac standards, meaning more purchasers would be eligible for federally backed mortgages issued at lower rates.

While most economists agree that a stimulus package is warranted during a time of slower growth to provide a buffer against recession, the agreement unveiled yesterday quickly found critics.

Liberal analysts said more money should be steered to the least well-off. "Three hundred dollars is not a lot of money," former Clinton Labor Secretary Robert B. Reich said on CNN. "Relative to the scale of the problem, it's really a drop in the bucket."

U.S. Rep. Elijah E. Cummings, a Baltimore Democrat, said he hoped the Senate added food-stamp and unemployment assistance. That money, he said, would circulate through the economy more quickly, "as opposed to tax rebates that are likely to be applied toward credit card or other types of debt."

State governments are also suffering from the downturn, but a request from the bipartisan National Governors Association for $12 billion in Medicaid assistance and block grants was rejected by House and administration negotiators.

The business tax break compounds the problem, and state governments would lose at least $4 billion "due to linkages between federal and state tax codes," said Robert Greenstein, executive director of the left-leaning Center on Budget and Policy Priorities.

"The package contains no fiscal relief for states, not even to offset this loss," Greenstein said.

But there appears to be little appetite for significant changes to the agreement, and senators will likely find themselves under pressure to move quickly.

"We can't take a lot of time," said Sen. Benjamin L. Cardin, a Maryland Democrat. "We have to reach decisions in the Senate, we have to have a bipartisan agreement or you're not going to get anything through."

Treasury Secretary Henry M. Paulson Jr., who negotiated the package for the Bush administration, acknowledged that the Senate had "an important role to play" but said "the American people are not going to have a lot of patience for taking time."

Sun reporter Matthew Hay Brown contributed to this article.

How much to expect

After yesterday's agreement, rebate checks could come as early as May.


Minimum rebate for anyone who earned at least $3,000 in 2007.


Maximum rebate for individuals, not including an additional $300 per child.


Maximum rebate per couple, not including an additional $300 per child.

Source: Associated Press

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