More About Those Stimulus Ideas...
Update: Yesterday evening, Senators voted 87-13 to cut off debate to the unemployment insurance bill, which prevented the consideration of amendments to extend expiring stimulus provisions. Some of those amendments, supported by Senators on both sides of the aisle, would have extended the homebuyer's tax credit. Final passage of the bill is expected later this week.
Today, the Congressional Quarterly reported that Congress is considering a bill (H.R. 3548) to extend unemployment benefits to help states deal with rising unemployment, but amendments to increase and extend the first-time home-buyer tax credit and net operating loss carry-back would probably also be added. Harry Reid has given assurances to Senator Isakson (R-GA) that the Senate will consider extending the home-buyer tax credit when it considers the unemployment benefits bill. Including provisions to extend the tax credit and carry-back period have been seen as ways to receive Republican support for extending unemployment benefits.
As it currently stands, CBO estimated that the unemployment bill would give states an additional $2.4 billion and would decrease the ten-year deficit by $200 million.
Attached to the unemployment bill may be an expansion the $8,000 credit to all primary home-buyers while also raising the eligible income limit from $75,000 to $150,000 for individuals. The carry-back proposal would extend and increase (from ARRA) the net operating loss carry-back from two to five years, allowing businesses to recover some of their current losses.
The CQ article reported that Senator Isakson is expected to propose a $17.1 billion offset, which would more than cover the $16.7 billion cost of extending the tax credit. The offset would come from a rule to make businesses report any payments of $600 or more annually to the IRS.
However, proposals to extend the tax-credit have come at a time when the IRS is reporting massive amounts of fraud related to the program. Howard Gleckman has pointed out on TaxVox that over 70,000 taxpayers claimed the credit even though they probably already owned homes (given the other home credits they had claimed in previous years). An additional 19,000 taxpayers claimed the credit for homes they have not yet purchased, and 580 children claimed the credit. The Treasury has estimated that the fraud has cost the government almost $140 million. Senator Isakson has said that the bill to extend the credit will include anti-fraud provisions.
According to another recent article from CQ, Democrats’ overall legislative plan seems to focus on designing a series of scattered economic policies to focus on job creation, instead of enacting a single bill with both spending and tax cuts. Speaker Nancy Pelosi stated that she expects Democrats to focus on extending certain measures under February’s American Recovery and Reinvestment Act (ARRA).
Pelosi did not discuss whether or not the costs from any additional stimulus or job creation proposals should be offset.
CRFB has repeatedly argued that if lawmakers enact additional stimulus measures or extend provisions from ARRA, the costs of doing so must be fully offset in the future with specific spending cuts and/or tax provisions.