Tax Provisions Hopeful Sign in New Stimulus, Says Tax Expert

The big question on the economic stimulus bill passed by Congress is: Will it work? Federal tax expert Dorothy Brown of Emory Law says one factor in favor of the new plan is that the tax provisions are incremental, rather than one-time payments.

"Studies have shown that one-time payments are likely to be saved," says Brown, "whereas with this bill, one of the tax provisions will adjust payroll withholdings for workers at the lower income level, which studies have shown are more likely to be spent."

"It will be an increase in the check every week, and workers are more likely to think 'this is more permanent, so I can go ahead and spend it' as opposed to a lump sum of $600 that they want to save," says Brown.

And because the tax breaks are hitting payroll withholding, "it's going to kick in sooner," also a positive sign, she says.

"When I look at the tax provisions, most of them go for low- and middle-income workers, which is exactly what President Obama said he was going to do—tax cuts for 95 percent of American families," Brown observes. "This may be one of the rare instances where a candidate said it and then when elected, did it."

On the president's housing policy, Brown says the provision giving bankruptcy judges the ability to renegotiate mortgages or write them down to the fair market value of the house "is a huge deal."

"I imagine they'll be some pushback," she says. "The argument is when you [renegotiate mortgages] then cost of credit for everybody goes up, because banks can no longer be comfortable with the documents they sign; they're going to be affected. But I think people will get over that. This is a crisis the likes of which we haven't seen."

Brown, professor of law, specializes in federal tax law and critical race theory and is known for her work examining the racial implications of federal tax policy. She has been an adviser to J. Stephen Swift of the U.S. Tax Court, an associate with Haynes & Miller in Washington, D.C., and an investment banker at New York’s Drexel, Burnham & Lambert. She also was a special assistant to the Federal Housing Commissioner at the U.S. Department of Housing and Urban Development in the late 1980s under President George H.W. Bush.

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