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Summary of Individual, Corporate andRenewable-Energy Tax Provisions in theSenate and House Versions of the AmericanRecovery and Reinvestment Act
Shawn Fremstad
February 2, 2009
Center for Economic and Policy Research
1611 Connecticut Avenue, NW, Suite 400Washington, D.C. 20009202-293-5380
www.cepr.net
This table summarizes the individual, corporate and renewable-energy tax provisions of the most recent House and Senate versions of the American Recovery and ReinvestmentAct (ARRA): the version passed by the House on January 28 and the version passed by the Senate Finance Committee and currently under debate in the Senate. (Various provisions related to state and local government finance are not summarized). For each provision the table: briefly describes current law, summarizes how ARRA would change it,notes differences between the House and Senate, and lists the Joint Tax Committee’s estimate of costs for 2009 to 2019. (Most of the tax provisions are temporary, so costs of permanent provisions would generally be higher). For some provisions, brief comments and the Tax Policy Center’s distribution estimates are provided.
ProvisionCurrent LawChanges in House and Senate Versions of American Recovery and Reinvestment Act
Cost (2009-19)/Comments
Individual Income Tax ProvisionsMakingWorkPay TaxCredit
No provision.
House:
For tax years 2009 and 2010, provides a refundable tax credit of up to $500 ($1,000 for joint returns).Credit would be calculated at a rate of 6.2% of earned income, and would phase out at a rate of 2% for taxpayerswith adjusted gross income in excess of $75,000 ($150,000 for married couples filing jointly). Taxpayers couldreceive the credit through a reduction in the amount of income tax that is withheld from their paychecks, or throughclaiming the credit on their tax returns.
Senate
: Same, except would phase out at a rate of 4% and limit credit to $200 for elderly and persons withdisabilities who receive $300 economic-recovery payment (non-tax provision in Senate and House bills).
House:
$144.9 billion.
Senate
: $141.8 billion.Costs are all inFY2009-11.
Summary of Tax Provisions in Economic Recovery Legislation
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1Center for Economic and Policy Research
Source: Tax Policy Center, TableT09-0052
Making Work Pay Credit: House
Source: Tax Policy Center, TableT09-0056
Earned Income Tax Credit
Distribution of New Benefits byIncome QuintilePercentage of Tax Units Receiving New EITCand MWP Benefits by Income Quintile
Bottom Second Middle Fourth Top
60898880637102
EITC Making Work Pay
Source: Tax Policy Center, Tables TablesT09-0056 and T09-0052.
ProvisionCurrent LawAmerican Recovery and Reinvestment ActCost (2009-2019) and CommentsIncrease inEarnedIncome TaxCredit forMarriedCouplesandFamilieswith Threeor MoreChildren
For married couples, beginning point of “phase-out range” is $3,120 higher thanfor individuals. For example, for married couples with no children, credit begins to phase out at $10,590 of earnings, compared to $7,470 of earnings for a single person.Families with two or more childrencurrently qualify for an credit equal to40% of the family's first $12,570 of earned income, subject to a phase-outfor families with adjusted gross incomein excess of $16,420 ($19,540 if filing jointly).For families with three or more children, increases the creditto 45% of the first $12,570 of earned income. Maximum for these families would be $5,657.For all married couples filing a joint return (regardless of thenumber of children), increases the beginning point of the phase-out range by $1,880 ($5,000 higher than for single people).Both provisions limited to tax years 2009 and 2010.$4.7 billion. (All in FY2009-2011).About half of benefits (53%) would go to familiesmaking $30,000-50,000 a year. About a tenth (11%)would go to families in the bottom fifth of theincome distribution.Adults without children would continue to receivedisproportionately small credit (maximum creditabout 1/6 of the credit for family with one child).
Child TaxCreditExpansion
An individual may claim a tax credit for each qualifying child under the age of 17. The amount of the credit per childis $1,000 through 2010. If the creditexceeds the taxpayer’s federal incometax liability, the taxpayer is eligible for anon-wastable (refundable) credit equalto 15% of earned income above $8,500in 2008 ($12,550 in 2009). Familieswith lower earnings are ineligible.
House:
Families with earnings below current-law thresholdeligible for a non-wastable credit equal to 15 percent of earnings, up to current-law maximum credit of $1,000.
Senate:
Families with earnings above $6,000 eligible for anon-wastable credit equal to 15 percent of amount of earnings in excess of $6,000. For example, parent withearnings of $6,500 would receive credit equal to $75.Both provisions limited to tax years 2009 and 2010.
House:
$18.3 billion (all in FY2010-2011).
Senate:
$10.5 billion (all in FY2010-2011).About 70% of benefits under House provisionwould go to tax units with income under $20,000.About 15% of such units would receive benefits.
Senate
provision would continue to exclude many parents working part-time because of a disability or to care for a disabled child.
Share of Tax Units Receiving New Benefit Under CTC Expansion
Average Amount of New CTC Benefit
Lowest Quintile (under $19,000) Second Quintile (under $37,600)Senate House Senate HouseLower Quintile Second QuintileSenate House Senate House
Summary of Tax Provisions in Economic Recovery Legislation
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2Center for Economic and Policy Research
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