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MENDOZA IN THE NEWS

Stimulus bill includes tax changes

Credits and cuts to help with college, buying a car, buying a house.

by Ed Ronco, Tribune Staff Writer
Publication: South Bend Tribune

February 17, 2009


That big federal stimulus bill President Barack Obama is set to sign into law today contains all sorts of tax changes that can make life a little easier for Hoosiers, U.S. Sen. Evan Bayh said here Monday.

The Indiana Democrat spent Monday promoting tax credits and incentives he said can make college more affordable, help people buy vehicles (including RVs) and take home more of their paychecks.

The tax changes are included in the $787 billion American Recovery and Reinvestment Act, which made it through Congress last week.

A tax credit for college expenses was chief among the provisions Bayh praised in front of cameras and reporters at South Bend Regional Airport during his fly-around tour, which included Fort Wayne, Terre Haute and Evansville.

The American Opportunity Credit, as it's called, can ultimately put about $2,500 back into the pockets of college students (or the families paying for their education) , Bayh said.

"We've also expanded it to include expenses other than just tuition," he said. "So if you happen to have some scholarship assistance that offsets the cost of tuition, this can help pay for the cost of books, room and board, those kinds of expenses that definitely make college more expensive."

It is hoped the measure will appeal to both current and prospective students, said Jeff Jones, vice chancellor of student affairs and enrollment management at Indiana University South Bend.

"It's bound to help students who are in school and their families," Jones said, "and I think it might be an encouraging factor for those students who think they might not be able to afford college." At the news conference, Bayh also touted: A tax credit for first-time home buyers, who can claim up to $8,000. A fix to the Alternative Minimum Tax, which was put in place to close a loophole on the rich nearly 40 years ago, but has since become outdated. A suspension of federal income tax on the first $2,400 of unemployment benefits. Something called the "Making Work Pay" credit, which is a credit of $400 for workers and $800 for married couples. Taxpayers should see the amount withheld from their paychecks be reduced slightly in the weeks ahead, Bayh said. A tax cut that allows people to deduct state sales tax on the purchase of a new car or recreational vehicle.

That's a big deal for the RV industry in Elkhart County, said BJ Thompson, whose Osceola marketing firm promotes RV companies.

"These are some very key pieces to getting more RV sales, he said. The more RV sales we get, the more people can get back to work."

With the exception of the payroll tax change, most of the provisions won't be realized until taxpayers file their 2009 returns, which are due in April 2010, said Ken Milani, a professor of accountancy at the University of Notre Dame and one of The Tribune's "Tax Talk" columnists.

Bayh said the investment side of the bill money to be poured directly into projects will be realized in the months ahead. And, he said, if you hold out for a bill that meets the needs of all 535 members of Congress, you ultimately end up with nothing.

"I think most people understand that government doesn't have all the answers or a magic wand," Bayh said. "The bill that the president's going to sign today is not perfect. There are some things I would do differently." Sen. Evan Bayh looks on Monday as Brian Newsom of South Bend speaks about the tax relief he and his family will get from the recently negotiated economic stimulus plan from Congress.

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