The Six Worst Tax Cuts in the Senate’s Stimulus

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After a week of debate and a round of stumping from President Obama, the Senate passed its version of the economic stimulus package on Tuesday afternoon.

The bill outlines $840 billion in spending and tax relief, and just after the votes were tallied, Citizens for Tax Justice released its list (PDF) of the six worst tax cuts—costing $123 billion more than the House bill—in the Senate’s stimulus:

  • The Alternative Minimum Tax “patch”: Halts the Alternative Minimum Tax for one year, but steers most of the cuts toward the richest 10 percent of taxpayers, who will receive 69 percent of the $70 billion cut and will be the least likely group to spend that money. The AMT began as a way for the government to force the ultra-rich to pay taxes, even if they found enough loopholes in the tax code to pay next to nothing.
  • The Home Ownership Tax Credit: Proposes a non-refundable credit to stimulate the housing market. Any family of four with more than $116,500 in income that purchases a home is eligible for a maximum $15,000 one-year tax break. If the family elects to take the credit over two years, it must show $78,250 in income. But since the tax is not refundable, it only benefits those who make enough money to have a tax liability.
  • Deduction for Automobile Purchases: Anybody who bought a car (maximum sticker price: $49,500) after November 12, 2008, and through the end of this year can deduct the loan interest and excise taxes on the car. That is if you can secure a loan.
  • Halting the Tax on Unemployment Benefits: Workers pay taxes on their unemployment benefits, so it sounds like a good idea, but it ultimately benefits high-income earners who receive unemployment assistance. The Senate provision reduces taxes on the first $2,400 of benefits, but the size of the cut varies based on the recipient’s tax bracket. For example, someone earning $200,000 normally pays a 28 percent income tax. If that person also received unemployment benefits on his or her way to making $200,000, he or she would receive a 28 percent tax cut on the first $2,400 of unemployment benefits. Another worker with $42,000 in total earnings pays a 10 percent income tax. If that worker receives unemployment assistance, he or she only sees a 10 percent tax cut on the first $2,400 in benefits.
  • Five-year Retroactive Tax Cut on Net Operating Losses: Lets companies receive refunds against taxable earnings going back five years, instead of the normal two-year period. The provision doesn’t create incentives for companies to use the refunds to hire new workers or expand their businesses.
  • Cancellation of Indebtedness Income Tax Deferment: The Senate bill offers a tax cut that will allow businesses to defer paying taxes on canceled debt. The IRS sees canceled, or forgiven, debt as income (if you take out a $20,000 loan, and your creditor cancels the debt, the IRS considers you $20,000 richer), and canceling this tax rewards businesses who take on heavy debt loads, one of the symptoms of the recession.

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Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

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Truth #5: It's about minority rule.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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