Big Business Loses Out on Tax Break Under Stimulus Deal

One potato, two potato, three potato, zip.

I wrote previously about Georgia Republican Sen. Johnny Isakson proposal that provided a $15,000 tax credit to consumers who purchase a principal residence--Senate Advances Tax Break for Homebuyers. This would have applied to the purchase of a new or existing home. Bad idea since purchasing an existing home does not add to the economy. Additionally, I could foresee that shrewd investors could find a way to swap houses and enjoy $30,000 in tax benefits at the expense of taxpayers. I also wrote about how this tax proposal would benefit the rich and not all taxpayers, Senate’s Housing Tax Credit Favors Higher-Income Homebuyers. Poof gone.

It was clear that Johnny, a former real estate agent, had one thing in mind--some payback for his campaign backers.

Democratic negotiators have also jettisoned a proposal from Georgia Republican Sen. Johnny Isakson that would have provided a $15,000 tax credit to consumers who purchase a principal residence before the end of 2009. The plan was strongly supported by the National Association of Home Builders and many Republicans.

Key words: National Association of Home Builders. Make the builders rich, do little for the consumer, nice try Johnny.

But after Mr. Isakson and most Senate Republicans voted against the overall stimulus package Tuesday, Democrats stripped it from the final legislation. Instead, they expanded an existing $7,500 tax credit for first-time home buyers to $8,000 and extended its expiration to the end of the year from this summer. The change cuts the cost of the home-buyer proposal to less than $3 billion over 10 years from more than 10 times that amount.

Fair enough.

Big business didn't do as well as they would have liked in the new stimulus spending package. I have nothing against big business as I invest in stocks all the time; however, I prefer companies that can do it the old fashioned way without needing to step up the the government "trough". Capitalism--good.

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Big Business Loses Out on Tax Break Under Stimulus Deal

By BRODY MULLINS

WASHINGTON -- From auto dealers to the home-building industry, big business appears to be the biggest loser in the final economic stimulus plan being pieced together Wednesday on Capitol Hill.

Negotiators from the House and Senate sliced billions of dollars in tax incentives for businesses and slashed huge tax breaks for consumers that were strongly backed by industry lobbyists.

Many of the business tax provisions were added to the stimulus legislation in the Senate in an effort to attract Republican votes. President Barack Obama wants bipartisan support for the plan and was dealt a setback when no Republicans voted for the House version of the plan two weeks ago.
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But when only three Republican senators voted for the Senate version of the bill Tuesday, Democrats slashed the business tax proposals in an effort to bring the total cost of the bill under $789 billion.

Though the details of the overall package could remain unclear until Thursday, interviews with congressional aides and industry lobbyists indicate that the final plan will include just $5 billion in tax incentives aimed at corporations, down from $21 billion in the Senate.

Democrats shed most of that by cutting back a tax break sought by unprofitable businesses to recoup taxes paid in the past five years by offsetting former profits with more recent losses. Democrats agreed to limit the tax benefit to small businesses, reducing its cost to just a few billion dollars from $19 billion included in the Senate bill.

Democratic negotiators have also jettisoned a proposal from Georgia Republican Sen. Johnny Isakson that would have provided a $15,000 tax credit to consumers who purchase a principal residence before the end of 2009. The plan was strongly supported by the National Association of Home Builders and many Republicans.

But after Mr. Isakson and most Senate Republicans voted against the overall stimulus package Tuesday, Democrats stripped it from the final legislation. Instead, they expanded an existing $7,500 tax credit for first-time homebuyers to $8,000 and extended its expiration to the end of the year from this summer. The change cuts the cost of the home-buyer proposal to less than $3 billion over 10 years from more than 10 times that amount.

Negotiators also dropped a plan by Sen. Barbara Mikulski (D., Md.) that would have allowed consumers to write off the interest on loans for vehicles purchased this year. In its place is a smaller plan to allow consumers to write off sales and excise taxes on car purchases. $2 billion he broader plan in the Senate would have cost $11.5 billion over 10 years.

In a win for business, negotiators sweetened a provision that would reduce the tax burden for companies that buyback their debt. The provision was backed by a coalition that included the U.S. Chamber of Commerce, private equity firms and Las Vegas casinos.

Several smaller tax provisions for businesses remained in the legislation. Negotiators appear ready to except a plan that would allow small businesses to more quickly write off there expenses and a second proposal to speed up the depreciation of new equipment and investments for all companies.

However, Florida citrus growers and California vintners lost a bid to expand those provisions to include agricultural projects.

Negotiators also cut a $500 worker tax credit to $400. Republican Sen. Olympia Snowe of Maine had called the worker tax credit the "signature" piece of Mr. Obama's stimulus plan.

Write to Brody Mullins at brody.mullins@wsj.com

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