What time is it when the market is down, unemployment is up, personal consumption is falling and manufacturing activity is contracting? Time for another economic stimulus package.
Last week, the Ways and Means Committee confirmed it will hold a hearing on the economic stimulus package on October 29th. The specifics have yet to be worked out and several House and Senate Committees are expected to have a hand in crafting the bill. Politico lists the most likely contenders:
It could include a permanent tax cut for lower- and middle-income families, in addition to the expected extension of unemployment benefits, increased money for food stamps and the states and more federal funds for bridges and other transportation projects.
House Speaker Nancy Pelosi and Senate Leader Harry Reid have made clear in recent days that both the House and the Senate will come back for a lame-duck session. The Senate is scheduled to come back for the week of November 17th. Earlier reports from the House indicated they may convene before the elections, but Speaker Pelosi has refused to put a timeline on consideration of a second stimulus package.
Regardless of the timing, Congress is set to consider another stimulus package following the elections and your S-CORP team is committed to ensure our Built-in Gains (BIG) reforms are included. If the business community needs access to capital, BIG reform can help. Here’s some more on Built-in Gains reform:B
- Letter from Associations Supporting for BIG Reform
- Letter from S-Corp Chairman Supporting BIG Reform
- Background on “Small Business Growth & Opportunity Act” — H.R. 3874
- Section by section summary of “S-CORP Modernization Act” S. 3063
Presidential Candidates Revise Economic Plans
In response to the continuing economic crisis, Senators Obama and McCain have put forward new additions to their economic proposals. Here is a quick summary of each of the candidate’s plans.
Obama’s plan would:
- Create a new temporary tax credit for companies that add domestic jobs. Through 2009 and 2010, existing businesses will receive a $3,000 refundable tax credit for each additional full-time employee hired; eliminate all capital gains taxes on investments made in small businesses and start-ups;
- Create a $25 billion Jobs and Growth Fund for infrastructure projects and schools; $25 billion in aid to states, and $25 billion in loan guarantees for auto companies to retool their plants;
- Instruct the Treasury Department to allow those 70 and and older to delay required withdrawals from their 401(k)s and IRAs and allow others penalty free withdrawals of 15% up to $10,000 from IRAs and 401(k)s (although subject to the normal taxes);
- Direct the Secretaries of Treasury and Housing and Urban Development to aggressively modify mortgages; 10% refundable tax credit on mortgage interest for those who don’t itemize their taxes; Reform bankruptcy code to allow for broader mortgage restructuring; Put in place a 90 day foreclosure moratorium for homeowners who are trying to pay mortgages; and
- Extend Treasury’s authority to purchase assets aside from mortgage backed securities to unfreeze other markets for student loans, car loans and other types of loans.
McCain’s plan would:
- Increase the amount of capital losses which can be used in tax years 2008 and 2009 to offset ordinary income from $3,000 to $15,000;
- Reduce the maximum tax rate on long term capital gains to 7.5 percent in 2009 and 2010;
- Allow up to $50,000 to be withdrawn from IRAs and 401(k)s at a tax rate of 10% through 2008 and 2009; Suspend required withdrawals from IRAs and 401(k)s for seniors over 70;
- Purchase mortgages directly from homeowners and mortgage servicers and replace them with an FHA-guaranteed fixed-rate mortgage.
Whichever plan moves forward – Congressional, Obama, or McCain - will add to the deficit in fiscal year 2009 and put additional pressure on Congress to raise overall tax revenues. As the Washington Post reported Saturday (about two weeks after your intrepid S-Corp team alerted its readers), the federal budget deficit is currently projected at $650 billion in 2009, and is likely to go up from there — to $1 trillion or more.