Pork-Laden Spending Bill Passes Senate

February 10, 2009

The American Recovery and Reinvestment Act of 2009 (H.R. 1) has now passed the Senate 61-37. A House version of the bill passed on January 28 with no Republicans voting for the bill. Both the House and Senate versions will cost about $1 trillion and are loaded with earmarks and funding for pet spending projects (which we will detail in full if and when a final version of the bill becomes law). Numerous tax provisions are contained in the House and Senate versions, some of which will have no immediate impact on the economy.

Here are the most troublesome provisions - (1) a new home ownership tax credit which will provide additional incentive for taxpayers to buy more home than they can realistically afford (which was a large part of what got us into the current problems); (2) an above-the-line deduction for new automobile purchases which will further encourage debt financing of a depreciable asset; (3) delayed recognition of certain cancelled debt income which would, in part bail-out investors who made bad investment decisions which contributed to the financial problems in the economy; and (5) numerous tax breaks for lower income people which don't have much of a stimulative impact on the economy.

Here's a comparison of the tax provisions in the House and Senate versions, as compiled by the Senate Finance Committee. Stay tuned, we'll have a full analysis of the tax provisions (and the pork) if the legislation becomes law.