The Wall Street Journal-20080124-Taxman Could Slow Stimulus Plan- IRS Can-t Mail Rebates Until at Least June- Negotiations Heat Up
Return to: The_Wall_Street_Journal-20080124
Taxman Could Slow Stimulus Plan; IRS Can't Mail Rebates Until at Least June; Negotiations Heat Up
WASHINGTON -- Congress is moving fast -- by its own standards -- to put together an economic-stimulus bill. Now lawmakers are facing a new hurdle: the Internal Revenue Service.
Even if Congress meets its goal of finishing a stimulus bill before March, it is likely to take until June for the government to start sending out the millions of rebate checks that would be the plan's centerpiece. It would take a couple more months before all the checks could be mailed.
The IRS -- and its computer system -- is focused on processing tax returns for 2007, and will be busy until May.
"It is remarkable that the world's leading economic power can't get checks out the door faster than that," Peter Orszag, the director of the Congressional Budget Office, told senators at a hearing Tuesday. "But it's a reflection of the fact that IRS's [technology] infrastructure is in a state that's under pressure and consumed, again, with the normal tax-filing season."
Who would get rebates and how they would work is one of the most hotly debated issues in congressional negotiations on the stimulus plan.
The talks intensified yesterday, with House Speaker Nancy Pelosi (D., Calif.) and House Minority Leader John Boehner (R., Ohio) -- the point people in the negotiations -- emerging from a meeting late last night with Treasury Secretary Henry Paulson sounding hopeful for an agreement.
"We're moving toward that, but all the issues are not resolved," Ms. Pelosi said. They plan to meet again early this morning before House Republicans leave town for a retreat.
Mr. Boehner, in a brief hallway interview, indicated he is open to providing rebates to a broader group than just people who pay income taxes, as Democrats have insisted. "Everyone who works pays taxes," Mr. Boehner said. But Republicans still want most of the rebate funds in the bill to go to taxpayers. Democrats have pressed for an upper- income limit so wealthier people don't get the checks.
Still, the broad parameters for the bill are becoming clearer. In addition to the rebate, the bill is likely to include added spending on unemployment benefits and food stamps. Some business-tax incentives are certain, with several proposals on the short list: accelerated breaks for equipment purchases, higher expensing limits for small firms, and letting companies with operating losses apply them to previous years to get a refund.
A big question for the IRS is how to get benefits to people who don't have income-tax liability. The last stimulus rebate, in 2001, went only to income-tax payers. This time, the IRS and the Social Security Administration have been discussing how they might identify and locate a broader group.
One possibility would be for the IRS to send checks to anyone who files 2007 tax returns, or who filed for certain refundable credits in 2006. Changes could also be made to the amounts withheld from people's paychecks for Social Security and Medicare taxes. Treasury already has been in contact with the IRS so that, if legislation is passed, "the IRS can implement it as quickly as possible while the current filing season is ongoing," said a department spokesman.
Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee, has pressed for provisions modernizing the Federal Housing Administration so it can insure more loans as well as temporarily increase the limits on the amount of loans Fannie Mae and Freddie Mac can buy. Ms. Pelosi said higher loan limits "need to become law one way or the other," but didn't say that would happen in the stimulus bill.
