WASHINGTON (Reuters) - The U.S. House of Representatives on Tuesday overwhelmingly approved a plan to give the U.S. economy a $146 billion election-year boost through tax rebates and other measures to stave off a possible recession by boosting business and consumer spending.
The plan, which passed by a vote of 385-35 and is backed by President George W. Bush, includes tax rebates of up to $600 for individuals and $1,200 for married couples, plus $300 per child. The legislation also includes tax breaks to encourage business investment in new equipment.
It now goes to the Senate, where Senate Majority Leader Harry Reid said it would be taken up quickly. The Nevada Democrat said he expects a number of amendments to be offered to the bill. But backers of the House bill are concerned that demands in the Senate to spend more for roads and other programs will slow down the legislation.
Lawmakers are aiming to get a bill to Bush's desk by mid-month and any changes in the Senate would mean further negotiations with the House and the White House to work out their disagreements.
Senate Republican Leader Mitch McConnell of Kentucky said the Senate should approve the House-passed version to avoid delays.
"This is not a time to get into some kind of testing of wills between the two congressional bodies. This is a time to show that we can rise above partisanship, do something important, and do it quickly," McConnell said.
House Speaker Nancy Pelosi, a California Democrat, and House Republican Leader John Boehner of Ohio, also urged the Senate to accept the House-passed package that the two leaders negotiated with the White House.
Lawmakers are hoping the rebates and business incentives will spur consumer and corporate spending and keep the economy from dipping into a recession ahead of the November presidential and congressional elections. U.S. economic growth is expected to slow this year in the face of a downturn in the housing market, a subprime mortgage crisis, a tightening credit market and rising oil prices.
ALTERNATIVE OFFERED IN SENATE
The House plan would cost the federal treasury nearly $146 billion this year and almost $15 billion next year, according to the latest estimates by the Joint Tax Committee.
Senate Finance Committee Chairman Max Baucus, a Montana Democrat, has offered an alternative that would provide a flat $500 rebate to all eligible people, $1,000 for couples and $300 per child. Seniors with Social Security and other income of at least $3,000 would also be eligible for the rebates.
While most economists expect the U.S. economy to slow significantly this year, it is unclear whether a full-blown recession is in the offing.
Stronger-than-expected orders in December for U.S.-made durable goods, which include big-ticket items such as aircraft and appliances, suggested the economy may not be as bad as some had thought. The Commerce Department said new orders for the long-lasting goods rose 5.2 percent last month, well above the 1.5 percent increase forecast by economists in a Reuters poll.
The economic outlook could become clearer on Friday when the government releases the January employment report. In December the unemployment rate jumped to 5 percent, from 4.7 percent in November. Investors were unnerved by a scant 18,000 new jobs created in December. They are expecting that a modest 63,000 new jobs were created this month.
The Senate Finance Committee is set to consider its proposal on Wednesday. That plan, with an estimated cost of about $156 billion, would also extend unemployment insurance benefits and provide some additional business tax breaks. A proposed $500 per individual and $1,000 per couple rebate in the Senate package would go to all tax filers who report at least $3,000 in income for 2007. Seniors with Social Security income also would be eligible for the rebate.
Under the House-passed measure, low-income individuals who did not earn enough to pay income taxes would get a $300 rebate, plus the child credit.
The House proposal would phase out rebates for individuals earning more than $75,000 in taxable income and for married couples earning more than $150,000. The Senate proposal has no income caps.
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