Lincoln: Balanced Recovery Bill Provides Tax Cuts For Arkansas Families and Businesses, Investments That Will Create New Jobs in Our State

Press Release

Lincoln: Balanced Recovery Bill Provides Tax Cuts For Arkansas Families and Businesses, Investments That Will Create New Jobs in Our State

U.S. Senator Blanche Lincoln (D-Ark.) today said the final economic recovery bill will provide tax cuts for small businesses and families and make investments that will create jobs and stimulate our struggling economy.

"We know that economic conditions won't begin to improve until targeted investments are made," said Lincoln, who was part of a small bipartisan group credited for securing a Senate agreement by cutting spending. "No piece of legislation is perfect nor is it the one and only fix to our nation's economic crisis. But without these time-sensitive critical investments, we can be guaranteed that economic conditions won't improve and millions of families will continue to struggle.

"Arkansas's families are hurting and small businesses are trying to survive. The tax cuts provided by this economic recovery bill will give them the relief they need. Further, the federal investments that will flow into our state will create new jobs, improve our communities, and help strengthen our economic security."

Lincoln pointed to a handful of tax cuts and investments included in the American Recovery and Reinvestment Act that will help Arkansas's working families and small businesses and create jobs in our state.

Tax Cuts for Arkansas's Small Businesses

The economic recovery bill provides small businesses access to capital and tools to help sustain and grow their business. The bill extends the small business expensing limits and bonus depreciation, which allows businesses to immediately write off fifty percent of the cost of depreciable property purchased in 2009.

In addition, small businesses will be allowed to carry back losses in 2008 for up to five years. This benefit will allow these businesses to credit their current losses against previously profitable years. Lincoln's amendment to reduce the built-in gains holding period on subchapter s corporations was also included. This provision will allow many businesses organized as s corporations to immediately access their own "trapped" capital without penalty.

Tax Cuts for Arkansas's Families

Refundable child tax credit: The credit is expanded in the American Recovery and Reinvestment Act to provide relief to more working families with children hit by the nation's struggling economy. Approximately 167,000 children in Arkansas will benefit from the expanded credit (source: Center on Budget and Policy Priorities). Lincoln has long-championed making the refundable child tax credit available to more working families with children.

Unemployment benefit tax suspension: The recovery bill allows the temporary suspension of federal income tax on the first $2,400 of unemployment benefits per recipient. Under current law, all federal unemployment benefits are subject to taxation. Arkansas's unemployment rate rose to 6.2 percent in December 2008 for a total of 84,400 individuals without jobs. Lincoln cosponsored this provision.

First-time homebuyer tax credit: The recovery bill provides a true credit of up to $8,000 to first-time buyers for the purchase of a principal residence. Lincoln cosponsored a modification of this tax credit.

Making Work Pay tax credit: The bill provides a refundable tax credit of up to $400 for working individuals and $800 for working families. The tax credit is phased out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for married couples filing jointly). Taxpayers can receive this benefit through a reduction in the amount of income tax that is withheld from their paychecks or through claiming the credit on their tax returns for 2009 and 2010.

Sales tax deduction for vehicle purchases: Taxpayers will be able to deduct state and local sales and excise taxes paid on the purchase of new cars, light truck, recreational vehicles, and motorcycles through 2009 (phased out for taxpayers with adjusted gross income in excess of $125,000 for individuals, $250,000 for joint filers).

State Fiscal Relief

Arkansas will receive an approximate $730 million increase in our federal Medicaid matching payment (Source: Government Accountability Office). As one of the poorest states in the nation, Arkansas relies heavily upon Medicaid funding as a safety net. As more Arkansans become jobless, the number of Medicaid recipients is expected to rise. Lincoln said Medicaid dollars serve as critical stimulus for health care providers and facilities. As a result of Lincoln's efforts, Arkansas will receive more funds than were provided in the original House bill.

Arkansas will receive approximately $363 million under the Education Block Grant for K-12 and higher education for 2009, 2010, and 2011 (source: Center on Budget and Policy Priorities).

Arkansas will receive approximately $80.8 million under the Flexible Block Grant to avert budget cuts in education or in other services, such as public safety and law enforcement, services for the elderly and disabled, or child care. Funds can also be used for school modernization, renovation, or repair (source: Center on Budget and Policy Priorities).

Economic Development and Job Creation

New Markets Tax Credit: The bill increases the allocation level of this tax credit to ensure more economic development projects in low-income and rural communities receive funding. Lincoln said this should help fund qualified projects in Arkansas that missed out during the last round of awards due to an insufficient volume of credits. A total of $5 billion (up from $3.5 billion) will be available for both 2008 and 2009.

Renewable energy investment credit: The bill provides an election to allow more taxpayers the benefit of the 30 percent investment tax credit for renewable energy technologies, such as woody biomass and animal waste electricity production projects. Lincoln said this tax credit would spur the creation of new "green" jobs in Arkansas, which as an agricultural state, can utilize these agricultural byproducts.

Qualified Zone Academy Bonds: The recovery bill provides an addition $1.4 billion, which state and local governments can use to finance renovations, purchase equipment, develop course material, and train teachers at a "qualified zone academy"—any public school that is located in an empowerment zone or enterprise community that is designed to cooperate with businesses to enhance academic curriculum and increase graduation rates.

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