Start-ups favored in upcoming Senate jobs bill

Start-up businesses could be big winners in the upcoming jobs bill by being exempt from capital gains taxes, said several congressional sources. 

Senate Majority Leader Harry Reid (D-Nev.) has instructed Senate Finance Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) to craft a jobs package that focuses on small businesses. 

Well-placed sources say talks between the Finance leaders are preliminary, but that zeroing out capital gains taxes for budding companies has been mentioned and could gain traction. 

Expanding small business loans is also expected to be included in the bill. Reid hopes to bring the package forward before Congress adjourns for Easter recess. 

The small business jobs bill is expected to follow several other jobs-related bills. Next on the docket is a travel promotion bill and legislation that extends several expired tax breaks and unemployment benefits through 2010. 

Reid looks to use the extender bill to provide additional funds to states for Medicaid and Medicare. Senate Republicans have vowed to oppose the measure if Reid adds these provisions unless he allows amendment on the bill. A Reid spokesperson said the majority leader will work with the Republicans to get an agreement, but stopped short of saying amendments would be allowed. 

Allowing amendments to the bill could possibly give Senate Minority Whip Jon Kyl (R-Ariz.) an opening to fix the estate tax. 

Kyl has long sought a process for dealing with the estate tax and has threatened to oppose Reid’s jobs agenda until an agreement on process was reached. 

There is no estate tax at the moment, as it lapsed on Dec. 31. But barring congressional action it returns next year to pre-2001 levels and will hit estates worth more than $1 million with a tax that tops out at 55 percent. Republicans and more than a few Democrats oppose this level. 

Failure to address the estate tax threatens to become a political liability for lawmakers, as it is unclear if estates will ever owe the tax. Congress has vowed to retroactively enact 2009 estate tax law, when estates worth more than $3.5 million were taxed at a top rate of 45 percent, but political will to do so appears to be lacking. 

Kyl hopes an agreement on a process for the estate tax will lead to a vote on legislation similar to an amendment he and Sen. Blanche Lincoln (D-Ark.) presented during last year’s budget debate, which created a 35 percent tax on estates worth more than $10 million per couple. 

Under budget rules, the minority whip must offset a portion of his bill. One option might be to create a “toll charge” on charitable foundations that would sock Democratic heavyweights like Bill Gates and Warren Buffett.