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Alternative Minimum Tax relief, business tax incentives, State fiscal relief,
aid to directly impacted individuals, and public investments. The following
sections of this appendix will discuss each of these categories in more detail.
Tax Relief
Within the first three categories of tax cuts, major programs included
the Making Work Pay tax credit, which provided a 6.2 percent credit on earnings
up to a maximum value of $400 for individuals and $800 for couples,
phasing out starting at income above $75,000 and $150,000, respectively
(estimated to cost about $116 billion between 2009 and 2011). The credit was
administered through reducing tax withholdings and the Internal Revenue
Service required that companies reduce withholding by April 1, 2009. In
addition, the legislation made $250 one-time payments to seniors, veterans,
and people with disabilities. The Recovery Act included the Making Work
Pay tax credit for 2009 and 2010. In December of 2011 Congress enacted a
2-percentage point reduction of the Social Security payroll tax for 2011 that
was extended through 2012 and expired at the start of 2013.
Additionally, the Recovery Act provided tax credits for families, such
as an expansion of the child tax credit, including making it refundable for
more low-income families (at a total estimated cost of $15 billion), expansions
of the earned income tax credit for married couples and families with
more than three children ($5 billion), and the American Opportunity Tax
Credit to help make college more affordable. All of these measures have
since been extended through 2017, and the President’s Budget for 2014
proposes to make them permanent—rendering them among the only items
from the Recovery Act intended to be permanent.
The Recovery Act also raised the exemption amount for the AMT to
$46,700 for individual taxpayers and $70,950 for joint filers, at an estimated
cost of $70 billion. Because this was a widely expected continuation of previous
AMT patches, this component of the Recovery Act did not represent a
net new fiscal impetus for the economy and is not included in CEA’s macroeconomic
estimates.
For businesses, the legislation provided cost-effective incentives to
expand investment by allowing businesses to immediately deduct half of the
cost of their investments (bonus depreciation) and also to extend the period
over which small firms (except those receiving TARP funds) could claim
losses and expense capital purchases. Businesses buying back or exchanging
their own debt at a discount were also allowed to defer any resulting income.
All of these measures were designed to improve the cash flow for firms that
might be facing credit constraints and to increase incentives to invest. Longrun
costs to the Federal Government were limited because the measures
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