Tax Stimulus Report Card: Senate Finance Committee

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Abstract

The Tax Policy Center has graded the key tax provisions of the pending Senate stimulus bill (the "American Recovery and Reinvestment Tax Plan of 2009"). Our grades, which rely on the bill's legislative language, focus on how well these measures would boost the economy in the short run. Accompanying write-ups describe current law, the proposed change, and the short- and long-term effects on the budget, the economy, fairness and tax complexity. We will update the report card as we learn more about the provisions and as the stimulus bill moves through Congress.

Introduction

TThe Urban Brookings Tax Policy Center has graded the key tax provisions of the pending Senate stimulus bill (the American Recovery and Reinvestment Tax Act of 2009, as amended). Our grades reflect how well these measures would boost the economy in the short run per dollar of budget cost (sometimes called "bang for the buck"). For grading purposes, we assume that each provision will expire as scheduled and consider only the effects on aggregate demand (consumption or investment) or employment in the short-term. Each grade depends on both timeliness and targeting. To receive an A, a provision would have to begin quickly and go primarily to people who would most likely spend it or to businesses that would most likely use funds to retain workers or expand. We do not consider the long-term effects on the economy. An attached write-up describes current law, the proposed change, and the short- and long-term effects on the budget, the economy, fairness, and tax complexity. There, we also discuss the likelihood that each proposal would actually expire as scheduled and, for some provisions, explain what changes would raise the grade to an A.

Our report card is preliminary and does not include all of the provisions in the bill most notably we omit provisions providing about $48 billion of fiscal relief for state and local governments. We may evaluate additional provisions and adjust our grades and analysis as we learn more about the proposals. In addition, TPC will update its Report Card as the stimulus bill moves through Congress.

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