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The Six Worst Tax Cuts in the Senate’s Stimulus Plan Package.

According to Citizens for Tax Justice, here are the six worst tax cuts (PDF Download) in the Senate’s version of the stimulus package, which will cost $123 billion more than the original House bill would have:

1. The Alternative Minimum Tax “Patch”

Projected Additional Cost Compared to House Bill: $70 Billion
Why It Won’t Help the Economy: Bulk of benefits go to richest 10%.

2. Home Ownership Tax Credit

Projected Additional Cost Compared to House Bill: $35 Billion
Why It Won’t Help the Economy: Benefits wealthy taxpayers and could inflate housing prices.

3. Above-the-line Deduction for Automobile Purchases

Projected Additional Cost Compared to House Bill: $11 Billion
Why It Won’t Help the Economy: Encourages debt and doesn’t target those who need help.

4. Suspension of Tax on Unemployment Benefits

Projected Additional Cost Compared to House Bill: $4.7 Billion
Why It Won’t Help the Economy: Benefits high-earners more than families who need help.

5. Five-year Carryback of Net Operating Losses

Projected Additional Cost Compared to House Bill: $2.2 Billion
Why It Won’t Help the Economy: Puts more cash in the hands of business owners without
changing their incentives to invest or create jobs.

6. Delayed Recognition of Certain Cancellation of Debt Income

Projected Additional Cost Compared to House Bill: $0.813 Billion
Why It Won’t Help the Economy: Rewards the behavior that got us here in the first place.

You can download the entire report right here. (PDF Download)


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Comments (10)

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  1. With respect, it is very difficult to understand why Citizens for Tax Jusitice reach their conclusion on the home ownership tax credit will beneft home owners generally – not just the wealthy (unless their definition of wealthy is anyone who owns a home). Also, it has at least the potential to help support house prices. Given that a significant part of the world’s financial problems were associated with the US housing market, anything that supports house prices is more likely to help than hurt.

    Am I missing something?

  2. david says:

    Good point, was wondering that myself…

  3. Imee says:

    The sixth, which is the Delayed Recognition of Certain Cancellation of Debt Income, I have to agree on you on that one.

  4. Miranda says:

    Great list! As usual, it appears our leaders have once again attempted to make things look good, but are really railing the people who need actual help. This whole thing would be much easier — and better — if they’d just focus on the task at hand, job creation, and stop throwing money around indiscriminately.

  5. PK says:

    The $15k Home Buyers Credit is not just for the wealthy. In it’s current wording, anyone with an tax liability under $15k will have no tax liablity at all if they buy a house in the qualifying time frame.

    A single earner making $50k and taking the standard deduction (because he doesn’t own a home) is liable for $6.6k in taxes or 13.2% of his income. 100% will be waived.

    Conversely a single earner making $100k will owe $19.5k and only decrease his taxes by $15k while STILL having to pay $4.5k (almost as much as the first guy got waived). Only 77% of his taxes are waived.

    Clearly the first guy gets better deal.

    You can’t argue to keep a graduated tax system with out graduated benefits for rebates and credits too. You should be happy the credit isn’t based on the pre-credit liability of taxes.

  6. david says:

    Everyone – I didn’t write the list, just an FYI. 🙂

  7. nickel says:

    As someone who’s not overly rich, but gets hit by the AMT, I welcome #1. If they would’ve just indexed this to inflation in the first place, it would be a non-issue.

  8. david says:

    Agree 100% nickel

  9. Rob says:

    #3 is a good move for the economy as a whole. Encouraging debt, from a “big picture” standpoint, is good. More debt = more money circulating. More money circulating is good right now, as it will help diffuse deflation worries ( deflation being even worse than inflation ).

    Taking on more debt is bad for *me*. But more people financing cars is good for the country. Go figure.

  10. DoneToZen says:

    I agree with Nickel. I make less than $100K but still got hit by AMT.

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