WASHINGTON – Barack Obama's economic recovery bill has grown to perhaps $850 billion after negotiations with his Democratic allies in Congress, who have rewritten some of the president-elect's tax proposals and may drive the price tag even higher.
But House Democrats are likely to back away from an effort to use the economic recovery bill to extend a tax cut for middle- to upper-income taxpayers. Obama's transition team had concerns that extending current rules regarding the alternative minimum tax wouldn't boost the economy.
Rep. Charles Rangel, D-N.Y., chairman of the tax-writing House Ways and Means Committee, said Wednesday that lawmakers in both the House and Senate wanted to use Obama's stimulus package to make the annual fix to the AMT to prevent more than 20 million additional tax filers from having to pay it.
But making that fix for one year alone would have cost about $70 billion, taking a healthy chunk out of the approximately $300 billion that Obama has set aside for tax cuts. Now, Democratic aides briefed on the details but demanding anonymity to speak frankly, say the soon-to-emerge $850 billion stimulus plan is unlikely to address the minimum tax, at least in the House version likely to be revealed Thursday.
In the Senate, Max Baucus, D-Mont., the top tax writer, said the alternative minimum tax fix was likely to remain in the recovery bill, which could drive the cost of the bill above $850 billion.
A $3,000 job-creation tax credit proposed by Obama, which drew strong objections as unworkable, still appears likely to be jettisoned from the Obama plan, Rangel said.
But a pro-business provision that would allow companies posting losses last year to get refunds for taxes paid as far back as five years earlier now sounds more likely to win inclusion in the relief package after talks Wednesday.
The AMT was designed in 1969 to make sure wealthy taxpayers pay at least some tax. But it never was indexed for inflation and therefore threatens to trap millions of people for whom it was never designed.
Obama's economic team has been resisting adding the AMT fix to the economic recovery bill, arguing privately that it won't do much to help the economy. It's virtually certain to be addressed later if left alone now — and in any event, the effects wouldn't be felt until next year's tax-filing season.
The House and Senate often have wrangled over how to pay for fixing the AMT — whether to use other tax revenues to cover the cost or to add the cost to the budget deficit.
Meanwhile, work continued throughout the Capitol on other pieces of the recovery package in hopes of unveiling the bill to lawmakers and the public on Thursday. Despite promises of an open process, the Obama transition team and its allies in Congress have refused to release any details in writing or thoroughly describe most of the bill's elements.
The Obama plan originally was plotted to cost $725 billion to $775 billion, most of which would reach the economy over the next three years. Now, aides involved in ongoing talks said, the measure would cost about $850 billion, with tax cuts in the range of $300 billion to $325 billion.
The largest components include $85 billion to $90 billion for cash-strapped states to help pay for the Medicaid health care program for the poor and disabled. Another $80 billion or so would go into a block grant to states for education, which Sen. Charles Schumer, D-N.Y., said would prevent cutbacks in school programs, layoffs and property tax increases.
There's also about $25 billion to pay for subsidies to help laid-off workers hold onto their health insurance, $35 billion to extend unemployment benefits and a 15 percent increase in food stamp benefits costing $20 billion.
Infrastructure spending, especially popular with rank-and-file lawmakers, is set for a big increase. Rep. John Olver, D-Mass., who chairs the panel funding transportation projects and public housing, said he had at least $55 billion on such projects. But other ideas, such as improving the nation's electrical grid, also are getting funded.
The recovery bill has set off a feeding frenzy in Washington as lawmakers across the spectrum press for add-ons. Sen. Arlen Specter, R-Pa., wants new health research funds, while Rep. Anthony Weiner, D-N.Y., claimed credit for $1 billion worth of police hiring grants, which he hopes would create 13,000 jobs.
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