The agreement was hammered out in a week of intense negotiations between House Speaker Rep. Nancy Pelosi, Republican leader Rep. John A. Boehner and Treasury Secretary Henry Paulson in hopes of reviving the slumping U.S. economy and averting a recession.
In the talks, Pelosi pressed to make sure tax relief would find its way into the hands of lower-income earners while Boehner pushed to include upper middle-class couples, congressional aides told the Associated Press.
The package drew fire from liberal activists and labor unions upset that proposals to extend unemployment insurance and boost food stamps had been dropped.
Pelosi said Congress would act on the agreement "at the earliest date, so that those rebate checks will be in the mail."
The rebates, expected to be sent in June, would cost about $100 billion, aides said. The package also includes close to $50 billion in business tax cuts.
Individuals who pay income taxes would get up to $600, working couples $1,200 and those with children an additional $300 per child under the agreement. Workers who make at least $3,000 but don't pay taxes would get $300 rebates, the AP reported.
The package would allow businesses to immediately write off 50 percent of capital equipment purchases and permit small businesses to write off additional purchases of equipment.
Both party leaders made concessions before they reached the agreement, sometimes to the dismay of their parties.
On Wednesday, Pelosi, D-Calif., agreed to drop increases in food stamp and unemployment benefits in exchange for gaining the rebates of at least $300 for almost everyone earning a paycheck, including those who make too little to pay income taxes.
A Republican-written provision to allow businesses suffering losses now to reclaim taxes previously paid was dropped.
President Bush praised the agreement in a statement at the White House, the AP reported. "This package has the right set of policies and is the right size," he said.
The rebates, which would go to about 116 million families, had appeal for both Democrats and Republicans. Pelosi's staff noted that they would include $28 billion in checks to 35 million working families who wouldn't have been helped by Bush's original proposal. Republicans, for their part, were pleased that the bulk of the rebates -- more than 70 percent, according to an analysis by Congress' Joint Tax Committee -- would go to individuals who pay taxes.
"I can't say that I'm totally pleased with the package, but I do know that it will help stimulate the economy. But if it does not, then there will be more to come," Pelosi said.
Boehner said the agreement "was not easy for the two of us and our respective caucuses."
The Treasury Department has already been talking to the IRS about getting the checks out "as quickly as possible, recognizing that the tax filing season is ongoing," Treasury spokesman Andrew DeSouza said, according to the AP.
The rebates would phase out gradually for individuals whose income exceeds $75,000 and couples with incomes above $150,000, aides said. Individuals with incomes up to $87,000 and couples up to $174,000 would get partial rebates. The caps are higher for those with children.
Senate Majority Leader Harry Reid said the goal is to send the package to President Bush by Feb. 15 for his signature. Reid said senators would want to look at add-ons including the unemployment extension and possibly money for highway projects.
To address the mortgage crisis, the package also raises the limits on Federal Housing Administration loans and home mortgages that Fannie Mae and Freddie Mac can purchase to as high as $725,000 in high-cost areas. Those are considerable boosts over the current FHA limit of $362,000 and the $417,000 cap for Fannie Mae and Freddie Mac's loan purchases.Fears of a U.S. recession prompted a worldwide sell-off in financial markets this week. But the stimulus package announcement and an emergency interest-rate cut of three-quarters of a percentage point by the Federal Reserve on Tuesday appear to have helped soothe financial markets.