Senate Dems want tax cuts for businesses that hire

Introduction

WASHINGTON (AP) — Democrats began trying to push a bill through the Senate Tuesday slicing taxes for businesses that hire new workers and buy major new equipment. They ran straight into opposition from Republicans who complained that the measure was too timid and sought to refocus the debate on their own economic priorities.

As soon as debate began, Sen. Orrin Hatch, R-Utah, said he would offer an amendment extending for another year broad tax cuts for millions of Americans that expire in January, including for the wealthiest earners. President Barack Obama and Democratic leaders want to renew them only for families earning up to $250,000 — a cutoff that Democrats say would force the rich to contribute to deficit reduction but Republicans say would stifle job creation.

“I remain amazed that the Democratic majority has decided to pursue this bill to support small businesses, when looming tax increases threaten to crush these same small businesses,” Hatch said.

“It’s just like asking to go into a deeper recession,” he added of the tax increases that will hit unless Congress acts. “It’s like saying we don’t care.”

Senate Majority Leader Harry Reid, D-Nev., would not say whether he would allow a vote on Hatch’s amendment, but it seemed unlikely. He tried turning the tables on Republicans by accusing them of holding middle-class tax cuts hostage so the wealthiest 2 percent of Americans could get tax reductions.

“So I give Mitt Romney and all the Republicans this news: They’re all doing just fine. Mitt Romney doesn’t need additional tax breaks,” Reid said of the wealthy GOP presidential challenger.

With Election Day less than four months off, the battle highlighted how both parties are using congressional debate to transmit their messages to voters with little regard to whether the legislation at stake will ever become law.

The Senate’s Democratic tax-cutting bill has little chance of surviving. Neither does Wednesday’s planned vote by the Republican-run House to repeal Obama’s 2010 health care law, which has no chance of being duplicated in the Democratic-led Senate.

The Senate bill debated Tuesday would let businesses take tax credits for 10 percent of the difference between their payrolls this year and 2011, whether the extra money is used to hire workers or give raises to existing employees.

Because the credit is capped at $500,000, Democrats said it would predominantly help small businesses. It also limits the tax credit to the first $110,100 of each worker’s salary, which the White House said meant that “well-paid executives would be ineligible for tax relief.”

The measure would also let firms buying major new equipment in 2012, such as machinery, deduct the entire cost of the purchase this year under so-called bonus depreciation rules. Currently they can only deduct half the amount.

Though both parties favor the idea, critics say it sometimes gives tax breaks to companies that would have purchased the equipment anyway, limiting its impact.

Democrats said the measure would create 990,000 jobs, citing a study they requested from a private, nonpartisan economic consulting firm. The White House said almost 2 million companies that boost their payrolls would get tax breaks and noted that Obama had proposed lower levies for small businesses in the “to-do” list he suggested for Congress in May.

The bill has a 10-year cost of $29 billion.

Republicans prefer a measure the House approved in April granting 20 percent tax deductions to all businesses with fewer than 500 employees — more than 99 percent of the nation’s companies. That bill — which would cost $46 billion over 10 years — drew a veto threat from Obama and has gone nowhere in the Senate.

Both measures would be paid for by enlarging federal deficits.

Republicans considered using procedural moves to prevent the Senate from even debating the business tax-cut bill.

But most decided the debate was an opportunity to showcase their own tax policies and the Senate voted 80-14 to begin debate. In the end, they are unlikely to help provide the 60 votes the measure will need for approval, unless they are unexpectedly able to reshape the bill to their liking.

“We’ll have to see what the bill looks like” at the end, said Senate Minority Leader Mitch McConnell, R-Ky. He added, “Having said that, I think it is a good idea to talk about taxes this week.”

House Speaker John Boehner, R-Ohio, plans a vote before Congress’ August break on extending all the tax cuts for a year. Republicans say this would give Congress time to work on overhauling the tax code and avert deep automatic spending cuts that take effect in January unless lawmakers head them off.

Reid also plans a vote soon on renewing the tax cuts, but only for those earning under $250,000.

Underscoring the partisan warfare over taxes and the economy, the two parties drew differing conclusions from a report issued Tuesday by the nonpartisan Congressional Budget Office.

The study found that the average federal tax rate — including income, payroll and other taxes — fell to 17.4 percent in 2009, the lowest level since the agency began compiling the data in 1979. Democrats contrasted that with continued GOP demands for tax cuts.

“However much Republicans try to perpetuate false claims, the facts speak for themselves: Tax rates have never been lower than under President Obama,” said Rep. Sander Levin, D-Mich., top Democrat on the House Ways and Means Committee.

The report also found that average before-tax income fell 12 percent from 2007 to 2009 to $88,400, while average government support payments have been growing.

“Under President Obama and the Democrats who control Washington, Americans have lost their jobs, seen their wages decline, and fallen into lower tax brackets,” said Michelle Dimarob, spokeswoman for Ways and Means Republicans. “A weak economy and fewer jobs is nothing to cheer about.”