WASHINGTON Democrats want to push tax cuts through the Senate for companies that hire new workers, give raises or buy major new equipment this year.
With neither party eager to let the other claim campaign-season victories, the ultimate fate of the roughly $29 billion legislation seems dubious. Debate was to begin Tuesday, though it was possible that Republicans, who prefer other tax changes, would use procedural blockades to quickly derail the measure.
The legislation would grant tax credits which are subtracted from a companys tax bill equal to 10 percent of the amount its 2012 payroll exceeds the salaries it paid in 2011. The maximum credit would be $500,000, a figure that would disproportionately help smaller businesses.
It would also let companies that buy major new property in 2012, such as machinery, deduct the entire cost of the purchase this year. Currently they can only deduct half the amount.
In an election year in which the slumping economy gives President Barack Obama and the Senates majority Democrats little to boast about, the proposal lets Democrats take the offensive on the tax issue while asserting they are trying to encourage job creation. It was reaching the floor days after the latest gloomy Labor Department report that a scant 80,000 jobs were created last month, leaving the unemployment rate at a rugged 8.2 percent.
This tax cut is by no means a cure-all, but it could be a difference-maker for small firms on the fence about adding payroll, said Sen. Chuck Schumer, D-N.Y. After last months sluggish jobs numbers, we may be on the verge of a rare moment of agreement on how to help the economy.
On Monday, Obama proposed continuing wide-ranging tax cuts which will otherwise lapse in January for most taxpayers, while letting them expire for households making more than $250,000 annually. He argued that the rich should contribute to deficit reduction efforts.
Republicans want all the tax cuts to be renewed and have opposed Democratic efforts to omit the highest earners, saying that would hurt businesses.
If my friends on the other side of the aisle truly care about small businesses, as I know they do, then they should join us in stopping these tax hikes that will hit those very same people if the president has his way, Sen. Orrin Hatch, R-Utah, top Republican on the Senate Finance Committee, said of Obamas proposal and the Senate Democratic bill. If small businesses need help then the best thing we can do is stop all the tax increases.
House Speaker John Boehner, R-Ohio, plans for a House vote on renewing all those tax cuts later this month. Senate Majority Leader Harry Reid, D-Nev., is likely to hold a Senate vote in July on Obamas proposal to renew the expiring tax reductions for all but those earning more than $250,000.
It was unclear whether Republicans would demand opportunities to reshape the business tax cuts or to force votes on other topics as the price for letting debate begin on the Democratic bill.
The legislation contrasts with a $46 billion measure Republicans pushed through the GOP-run House in April granting 20 percent tax deductions to all businesses with fewer than 500 employees more than 99 percent of the nations companies. It drew a veto threat from Obama and has gone nowhere in the Senate.
Both measures were unpaid for, meaning that if enacted, their price tags would make federal deficits bigger.
Both parties support the tax breaks for equipment purchase, though critics have questioned their job-creation potential because they say they would cut taxes for companies that would have bought items anyway.