President Obama signed into law Tuesday the largest government economic rescue plan in the nation's history, a $787 billion package of spending, tax cuts and tax credits that's designed to help pull the nation out of what's becoming a nasty downturn.
The American Recovery and Reinvestment Act covers a broad spectrum, including money to refurbish public housing and incentives for energy conservation. The 1,000-page plan aims to create and preserve jobs, and also to accelerate the transformation of key economic sectors.
While the plan provides some benefits directly to individuals, the main way it's intended to help Americans is to promote economic activity nationwide. The stimulus is but one part of a multifront attack by the government on the recession.
Other parts include the mortgage-relief program that Obama will announce today and the next phase of the bank bailout, to be announced soon. They're all intended to work together, along with efforts by the Federal Reserve to kick-start the economy. However, individuals will benefit most once the economy resumes growth rather than from the stimulus itself.
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Here are some answers to questions about what the stimulus plan might mean to taxpayers and consumers.
Question | Will I get a tax rebate like last year?
Answer | No. Taxpayers won't receive checks this year. This plan involves a payroll tax cut, where employers will withhold less in taxes, meaning there will be a modest bump up in take-home pay until an income threshold is met. The cap is $400 for single filers and $800 for joint filers whose adjusted gross income falls below $75,000 and $150,000, respectively.
Q. | What if I'm self-employed?
A. | You must adjust your quarterly tax filings to capture this credit.
Q. | I don't earn a lot. How else does the stimulus plan help me?
A. | The stimulus plan includes a temporary expansion of the earned-income tax credit for families with three or more children, and it allows more low-income families to receive a refundable child tax credit this year and next. For recipients of food stamps, the dollar amount of this assistance will increase by 14 percent.
Q. | What about people who are disabled or living on their Social Security checks?
A. | The Social Security Administration will be sending a one-time $250 "economic recovery payment" within 120 days for people in this category. Check the agency's Web site, or AARP's Web site, in the coming days for more detail.
Q. | I've lost my job. How does this help?
A. | If you're eligible for unemployment benefits this year, you no longer will have to pay federal taxes on the first $2,400 of these benefits. The bill also extends unemployment benefits that would've phased out in March through December, and it raises the average weekly benefit by $25 a week, to $325.
Q. | I've lost my health insurance. Where do I get coverage for my family?
A. | If you lose job this year and choose to take Cobra coverage to keep your family covered on health care, the government will now subsidize up to 65 percent of the costs of your premium for nine months. If you lost your job anytime after Sept. 1 and elected not to receive Cobra coverage but now want it, you can contact your former employer and it should be available. Help on Cobra premiums will be available to any worker laid off from Sept. 1, 2008, to Dec. 31, 2009.
Q. | I need to buy a car. Does the stimulus plan help me?
A. | It doesn't provide the steep tax credits some prominent economists had advocated but will allow you to deduct from your federal taxes the state sales taxes that are associated with buying a car, truck, motorcycle or recreational vehicle. This benefit phases out for single tax filers who have adjusted gross incomes above $125,000 or joint filers above $250,000.
Q. | There'd been talk of a $15,000 tax credit for home purchases. Is this in the stimulus?
A. | No. The stimulus plan expanded an existing program for first-time home buyers, but didn't expand it to everyone. It raised by $500, to $8,000, the tax credit for first-time buyers who purchase a home. Before, this credit had to be repaid if a home was sold within three years of purchase. That repayment no longer is required.