President-elect Barack Obama still has a couple of weeks until his inauguration on Jan. 20, but he’s already starting to push a major economic recovery plan. It’s full of tax cuts, incentives for creating jobs and infrastructure improvement. While the plan is by no means finalized, estimated costs are somewhere around $675 and $775 billion.

What Does It Mean For Me?

The fact that Obama has an economic recovery plan that he wants to pass once he’s elected is a great concept. However, it’s a little harder to translate a plan into what most people can actually expect in terms of tax cuts and other help.

• Tax Credit for Workers: Obama’s plan calls for a tax credit for 95% of workers — $500 for individuals and $1,000 for families. Pretty much anyone making less than $200,000 would qualify — including those individuals who don’t actually make enough to pay federal income taxes. Obama’s team is hoping to make the credit retroactive, meaning that it would apply to your 2008 tax return.
• Tax Credit for Employers: Obama also wants to create a $3,000 tax credit for each new job created by existing businesses. There will also be some incentives for employers who manage to avoid cutting jobs. The idea is that there will be more jobs available, reducing unemployment. The two tax credits account for approximately half the estimated cost of Obama’s recovery plan.
• Improving Infrastructure: In order to keep in-progress and fast-tracked infrastructure projects on time, Obama plans to make $25 billion available to schools and other infrastructure projects. The money is intended to make sure that key repairs can be made, as well as helping keep workers needed for those projects employed. According to Obama’s plan, this move will preserve up to 1 million jobs.
• Extended Unemployment: Obama advocates extending unemployment benefits an additional 13 weeks in order to help workers who have already lost their jobs. Additionally, his plan allows for suspending taxes on unemployment insurance benefits, at least temporarily.
• Retirement Hardship Withdrawals: As it stands, there are huge penalties for withdrawing money from your 401(k) or IRA before you reach retirement age. Obama is in favor of allowing ‘hardship withdrawals’ — letting families withdraw up to $10,000 from their retirement accounts.
• Create Mortgage Restructuring Options: In order to help homeowners who have made good faith efforts to pay off their mortgages, Obama plans to allow the Secretaries of the Treasury and Housing and Urban Development to modify the terms of mortgages, as well as reforming the bankruptcy code to allow for more mortgage restructuring.
• Preventing Property Tax Increases: Obama wants to offer $25 billion to local governments to provide the money that they would otherwise have to be raised by increasing property taxes or cutting vital services.

There is far more to Barack Obama’s economic recovery plan, but it’s important to remember that the whole plan remains in flux. While Obama can send a bill outlining his plan to Congress as soon as he is sworn into office, Congress must still pass it before any part of the plan goes into action. And while the Democrats in both the House and Senate will do everything they can to pass the plan as is, there will probably be quite a bit of negotiating before the final product passes.

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