WASHINGTON -- President-elect Barack Obama and congressional Democrats are crafting a plan to offer about $300 billion in tax cuts to individuals and businesses, a move aimed at attracting Republican support for an economic-stimulus package and prodding companies to create jobs.
The size of the proposed tax cuts -- which would account for about 40% of a stimulus package that could reach $775 billion over two years -- is greater than many on both sides of the aisle in Congress had anticipated. It may make it easier to win over Republicans who have stressed that any initiative should rely more heavily on tax cuts rather than spending.
The Obama tax-cut proposals, if enacted, could pack more punch in two years than either of President George W. Bush's tax cuts did in their first two years. Mr. Bush's 10-year, $1.35 trillion tax cut of 2001, considered the largest in history, contained $174 billion of cuts during its first two full years, according to Congress's Joint Committee on Taxation. The second-largest tax cut -- the 10-year, $350 billion package engineered by Mr. Bush in 2003 -- contained $231 billion in 2004 and 2005.
Republicans and business leaders hadn't seen specifics of the proposals Sunday night, but welcomed the idea of basing a bigger proportion of the stimulus plan on tax cuts. Their response suggests the legislation could attract relatively broad support, and it highlighted the Obama team's determination to win backing from varied interests.
Some Republicans, including Senate Minority Leader Mitch McConnell (R., Ky.), have warned against a careless stimulus plan that enables unfettered spending.
The largest piece of tax relief in the new plan would involve cuts for people who pay income taxes or who claim the earned-income credit, a refund designed to lessen the impact of payroll taxes on low- and moderate-income workers. This component would serve as a down payment on the "Making Work Pay" proposal Mr. Obama outlined during his election campaign, giving a credit of $500 per individual or $1,000 per family.
On the campaign trail, Mr. Obama said he would phase out a similar tax-credit proposal at around $200,000 per household, but aides said they haven't settled on an income cap for the latest proposal. This part of the plan is similar to a bipartisan initiative launched in early 2008, which sent out checks worth $131 billion.