President Obama pushed back against Republican critics of the economic stimulus package making its way through Congress on Wednesday, saying failure to act quickly "will turn crisis into a catastrophe and guarantee a longer recession."
His top advisers said the financial wounds at the center of the economic downturn will require more money and more government intervention to mend. "It's going to be lots more billions of dollars," Paul Volcker, chairman of the president's Economic Recovery Advisory Board, told members of the Senate banking committee.
Legislation Congress is crafting could cut tax bills for Americans in many ways: sending a kid to college, purchasing a new car, buying a first home or making the one you own more energy efficient.
Most workers would see about a $20 a week increase in their take-home pay, starting around June, from a new tax credit. Millions of others who don't make enough money to pay income taxes would get checks from the government when they file their 2009 tax returns.
The $819 billion economic recovery package approved by the House last week includes about $188 billion in tax breaks for families and individuals over the next two years.
The Senate package, which has topped $900 billion, has about $263 billion in tax breaks for families and individuals.
Here are some ways taxpayers could save money:
The centerpiece of the tax package provides credits of up to $500 for individuals and $1,000 for couples in 2009 and 2010, hence the increase in take-home pay. Individuals making more than $75,000 and couples making more than $150,000 would receive reduced amounts.
Parents with children in college — and some adult students — could get tax credits of up to $2,500 to help cover tuition and related expenses in 2009 and 2010. Families making between $160,000 and $180,000 would get reduced credits. Those making more are ineligible.
The Senate voted unanimously Wednesday to give a tax break of 10 percent of the value of new or existing residences, up to $15,000, to homebuyers in hopes of revitalizing the housing industry. A House package covers homes bought before July 1. The Senate bill covers homes bought before Sept. 1. The proposal would cost an estimated $19 billion.
They could get a tax credit of up to $1,500 by making their homes more energy-efficient in 2009 or 2010. Numerous projects would qualify, such as installing energy-efficient windows, doors, roofs, furnaces, water heaters and air conditioners, or adding insulation. Homeowners can get back 30 percent of their expenses, up to $1,500.
People who buy new cars in 2009 could deduct the interest payments and sales taxes from their taxable income under the Senate bill, cutting the cost of a car by $1,500 or more. The $11 billion tax break would apply to new cars purchased from November 2008 through 2009. Individuals with incomes less than $125,000 and couples making less than $250,000 would be eligible, regardless of whether they itemize their deductions. The House bill doesn't have a corresponding credit.
Alternative Minimum Tax: The Senate bill would spare about 24 million taxpayers from being hit with the tax in 2009. On average, the change would save mainly upper middle-income families of four about $2,300. The House bill does not contain the annual AMT "fix," but Congress is unlikely to let 2009 lapse without doing it.
Earned Income Tax Credit: It would be expanded for poor families with three or more children who pay no income taxes. The maximum check they could receive from the government would rise $5,028 to $5,656.
Child tax credit: The Senate bill lowers the earnings threshold to qualify for the $1,000 credit from $12,550 to $6,000. The House bill would eliminate the earnings threshold, saving families $18.3 billion.