Congressional leaders announced a deal with the White House Thursday on an economic stimulus package that would give most tax filers refunds of $600 to $1,200, and more if they have children.
House Speaker Nancy Pelosi said Congress would act on the agreement -- hammered out in a week of intense negotiations with Republican Leader John A. Boehner and Treasury Secretary Henry Paulson -- "at the earliest date, so that those rebate checks can be in the mail."
President Bush praised the agreement in a statement he delivered to reporters at the White House. "This package has the right set of policies and is the right size," he said.
The rebates, which would go to about 116 million families, had appeal for both Democrats and Republicans. Pelosi's staff noted that they would include $28 billion in checks to 35 million working families who wouldn't have been helped by Bush's original proposal. Republicans, for their part, were pleased that the bulk of the rebates -- more than 70 percent, according to an analysis by Congress' Joint Tax Committee -- would go to individuals who pay taxes.
Individuals who pay income taxes would get up to $600, working couples $1,200 and those with children an additional $300 per child under the agreement. Workers who make at least $3,000 but don't pay taxes would get $300 rebates.
The first rebate payments could begin going out in May, and most people could have them by July, Paulson said, noting that the IRS will already be overwhelmed processing 2007 tax returns. The rebates were expected to cost about $100 billion, and the package also includes close to $50 billion in business tax cuts.
Breaks for Business
The package would allow businesses to immediately write off 50 percent of purchases of plants and other capital equipment and permit small businesses to write off additional purchases of equipment. A Republican-written provision to allow businesses suffering losses now to reclaim taxes previously paid was dropped.
Pelosi, D-Calif., agreed to drop increases in food stamp and unemployment benefits during a Wednesday meeting in exchange for gaining the rebates of at least $300 for almost everyone earning a paycheck, including those who make too little to pay income taxes.
"I can't say that I'm totally pleased with the package, but I do know that it will help stimulate the economy. But if it does not, then there will be more to come," Pelosi said.
Boehner said the agreement "was not easy for the two of us and our respective caucuses."
"You know, many Americans believe that Washington is broken," Boehner said. "But I think this agreement and I hope that this agreement will show the American people that we can fix it and will serve to move along other bipartisan agreements that we can have in the future."
Paulson said he would work with the House and Senate to enact the package as soon as possible, because "speed is of the essence."
The Treasury Department has already been talking to the IRS about getting the checks out "as quickly as possible, recognizing that the tax filing season is ongoing," said Treasury spokesman Andrew DeSouza.
The rebates would phase out gradually for individuals whose income exceeds $75,000 and couples with incomes above $150,000, aides said. Individuals with incomes up to $87,000 and couples up to $174,000 would get partial rebates. The caps are higher for those with children.
The agreement left some lawmakers in both parties with a bitter taste, complaining that their leaders had sacrificed too much in the interest of striking a deal. Many senior Democrats were particularly upset that the package omitted the unemployment extension.
"I do not understand, and cannot accept, the resistance of President Bush and Republican leaders to including an extension of unemployment benefits for those who are without work through no fault of their own," Rep. Charles B. Rangel, D-N.Y., the Ways and Means Committee chairman, said in a statement.
Sen. Max Baucus, D-Mont., the Finance Committee Chairman, said leaving out the unemployment extension was "a mistake," as he announced plans to craft a separate stimulus package in the Senate starting next week.
Majority Leader Harry Reid said the goal is to send the package to the White House by Feb. 15 for President Bush's signature, but he noted the Senate would likely try to add more spending to the package.
"I expect that the (Finance) Committee and other senators will work to improve the House package by adding funds for other initiatives that can boost the economy immediately, such as unemployment benefits, nutrition assistance, state relief and infrastructure investment," Reid said in a statement.
Bush has supported larger rebates of $800-$1,600, but his plan would have left out 30 million working households who earn paychecks but don't make enough to pay income tax, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center. An additional 19 million households would receive only partial rebates under Bush's initial proposal.
To address the mortgage crisis, the package also raises the limits on Federal Housing Administration loans and home mortgagesthat Fannie Mae and Freddie Mac can purchase to as high as $725,000 in high-cost areas. Those are considerable boosts over the current FHA limit of $362,000 and the $417,000 cap for Fannie Mae and Freddie Mac's loan purchases.
After a key Wednesday night meeting in which the parameters of an agreement were reached, Pelosi and Boehner spoke again Thursday to cement the accord.
In the talks, Pelosi pressed to make sure tax relief would find its way into the hands of lower-income earners while Boehner pushed to include upper middle-class couples, according to congressional aides.
The package was drawing fire from liberal activists and labor unions upset that proposals to extend unemployment insurance and boost food stamps had been dropped. Many Democratic lawmakers had assumed those proposals would make it into the package, and critics of the deal said those ideas could pump money into the economy more quickly than tax rebate checks that won't be delivered until June.
Democrats wanted to extend unemployment benefits for people whose 26 weeks of benefits have run out, but Republicans resisted.
Conservative Republicans, meanwhile, were likely to be restless over tax rebates going to those without income tax liability.
Democratic aides said greater GOP flexibility over giving relief to poor families with children -- who would not have been eligible under Bush's original tax rebate proposal -- was the catalyst that moved the talks forward.