Capital Corner: $timulu$

Jim Brandenburg, CPA, MST Shareholder - Tax email | bio
January/February 2009

Former Illinois Senator Edward Dirksen once stated, “A billion here, a billion there; pretty soon you’re talking about real money.” Move ahead about forty years, and another former Illinois Senator Barack Obama is proposing an economic stimulus package approaching a trillion dollars. Perhaps we could paraphrase Mr. Dirksen, and offer: “A trillion here and a trillion there, and pretty soon you’re talking real money.”

About 1/3 of Obama’s stimulus package includes tax savings, and the balance involves new spending proposals all designed to turn the economy around. This new package is on top of the $700 billion “emergency” stabilization plan enacted last October, of which ½ of the funds have yet to be deployed (and not to mention other intervention in the markets by the Fed and Treasury Department during 2008). Obama hopes the package will work its way quickly through Congress. While the details are still being ironed out, some of the major provisions are likely to include the following:

The extension of the $250,000 Section 179 expensing provision and 50% “bonus” depreciation incentive will be extended through 2009.
The ability for businesses to carry net operating losses back five years, rather than two years.
A $500 tax credit ($1,000 for a marred couple) for workers, reduced or eliminated for those couples making over $150,000.
Estate Tax Changes. This is a high priority for Congress in 2009 to restore an estate tax in 2010, rather than let the repeal take effect. Look for an estate tax exemption of ~ $3,500,000.
State Assistance. As with the overall economy, many states are facing budget shortfalls. Some states are trying to cut spending; some are looking to raise taxes, and some others are asking Washington for a bailout.

Anyway, it will an interesting start to the new administration and new Congress in Washington. Stay tuned!