Some dems opposed to Obama’s jobs credit plan

AJ Contributor
Font Size:

WASHINGTON – President Barack Obama’s plan to offer tax credits to businesses that add workers is running into opposition from some rank-and-file Democrats in the House. “I don’t know anybody in business who hires an employee because they will get a tax break,” Rep. Mike Thompson, D-Calif., said Wednesday. “They hire employees because they have work to do.”

Obama proposed the tax credit as part of his plan to refocus his administration’s efforts to ease unemployment in the run-up to congressional elections in November. Senate Democrats were close to reaching a bipartisan deal Wednesday on their own version of the tax break, but House Democrats have been slower to embrace the idea.

Rep. Charles Rangel, D-N.Y., chairman of the tax writing House Ways and Means Committee, offered this assessment: “It’s controversial, it’s on the table.”

Obama wants to give companies a $5,000 tax credit for each net new worker they hire in 2010. Also, businesses that increase wages or hours for existing workers in 2010 would be reimbursed for the extra Social Security payroll taxes they would pay.

Senate Democrats, meanwhile, were working on a bipartisan jobs package Wednesday that includes a similar plan to 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 is modeled after a proposal by Democratic Sen. Chuck Schumer of New York and Republican Sen. Orrin Hatch of Utah. It would save companies 6.2 percent of the workers’ salaries that are subject to Social Security taxes, and would cost about $11 billion over 10 years, according to updated estimates. Schumer said the money would be repaid to Social Security.

Senators hope to unveil a jobs bill as early as Thursday, and to vote on it as early as next week. The bill under discussion Wednesday would also extend unemployment payments for those whose benefits have run out, and would renew a program that offers the jobless a subsidy for health insurance premiums under the COBRA program. About $33 billion in popular tax breaks, including an income tax deduction for sales and property taxes and a business tax credit for research and development, would be extended for one year, through 2010.

The bill would cost a total of about $81 billion, and would be partially offset by closing an unintended tax loophole enabling paper companies to get tax credits for producing alternative fuels during the paper-making process.

Obama first said he supported a new jobs tax credit in December, but House Democrats left it out of a jobs bill they passed that month because they couldn’t figure out how to make it work effectively. That bill stalled in the Senate.

Rep. Lloyd Doggett, D-Texas, said companies that have struggled to keep workers would miss out on the credit while those that got rid of workers could get it when they hire replacements.

“Surely, the Treasury can come up with a better way to promote job growth,” Doggett said to Treasury Secretary Tim Geithner Wednesday at a House Ways and Means Committee hearing.

Geithner said that while increasing consumer demand is key to job growth, tax breaks for hiring new workers could help as demand starts to pick up.

“This doesn’t solve all problems,” Geithner said. “But we think it’ll make a real difference.”