Washington Scuffling over jobs and taxes, congressional Democrats began refining their election-year jobs package Tuesday in a challenge to Republicans to balance their party’s complaints about big spending with action to help unemployed Americans.
At the same time, the Democrats’ effort promises to test President Barack Obama’s own ability to set the legislative agenda.
Democratic senators were seeking bipartisan support for tax incentives to businesses that add payroll this year. Many Republicans were noncommittal, but they promised an election year fight against Obama’s long-stated plan to let income tax rates return to higher levels for families making more than $250,000 a year.
Republicans said the income tax increases would hurt the same small businesses Obama is trying to help, because many small businesses are taxed the same as households. Many Democrats have opposed the tax cuts, initiated by President George W. Bush, for years.
Sen. Olympia Snowe of Maine, a moderate Republican who sometimes votes with the Democrats, said small businesses won’t add jobs, even with a new tax credit, if they are worried about paying higher taxes next year.
“There is no way they are going to move forward to job creation,” Snowe said. “Who is going to take the risk, depending on what they’re hearing coming out of Washington these days?”
Democrats hope to pass a series of jobs bills in the coming weeks, starting with one that features tax incentives for businesses that add payroll. The proposal emerging in the Senate is modeled after a bill by Democratic Sen. Chuck Schumer of New York and Republican Sen. Orrin Hatch of Utah.
The Schumer-Hatch bill would exempt companies from paying the employer’s share of Social Security payroll taxes for new workers hired this year, as long as those people had been unemployed at least 60 days. The plan would save companies 6.2 percent of the workers’ salaries that are subject to Social Security taxes. It would cost an estimated $10 billion over 10 years.
Schumer said the money would be repaid to Social Security through unspecified future spending cuts.
Obama’s proposal has an additional provision that would award $5,000 tax credits to companies that add workers in 2010. Tennessee Sen. Lamar Alexander, a member of the GOP leadership, suggested that Republicans will look dubiously on the plan because previous efforts had little effect.
Senate Majority Leader Harry Reid, D-Nev., said the jobs bill would also extend at least three programs for another year: funding for the highway trust fund; tax breaks for small businesses that buy new equipment; and a bond program to help state and local governments pay for infrastructure projects.
Senators also are considering extending unemployment payments for those whose benefits have run out, and renewing a program that offers the jobless a 65 percent subsidy for health insurance premiums under the COBRA program. Those provisions would be paired with the one-year extensions of $31 billion in popular tax breaks, including an income tax deduction for sales and property taxes and a business tax credit for research and development.
The House passed the tax break extensions in December but the Senate, which was preoccupied with the health care debate, did not act.