Senate payroll tax credit could trigger battle with House

House Majority Leader Steny Hoyer (D-Md.) is praising the Senate for including a payroll tax credit in its jobs package, but it could set up a battle in his House Democratic caucus.

Economic conditions are ripe for a provision that serves as an incentive for employers to expand their workforces, in Hoyer’s eyes. The economy is growing again, and surveys indicate growing confidence by business.

“The economists that talked to us [said] a jobs tax credit would in fact be very effective,” Hoyer said at his weekly press conference this week. “There seems to be a sense that this is an environment where this will be really helpful.”

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At the same time, Hoyer acknowledged resistance within his party from those who worry the tax break might only be used by companies already planning to hire additional workers.

The non-partisan Tax Policy Center agreed with this assessment and reduced the credit to a political ploy by Democrats to maintain their majority after November’s election.

“[A] cynic might say it is an effort to bail out terrified Democrats by paying companies to hire new workers before the November elections,” writes Howard Gleckman in a Jan. 29 blog, TaxVox. Gleckman is a senior research associate who splits his time between the Urban Institute and the Tax Policy Center.

“It might even help Democrats take credit for hiring that was going to happen anyway,” he writes.

Separately, there’s worry among some Democrats that their leaders in the Senate are overloading a jobs package with tax breaks for business.

Sen. Sherrod Brown (D-Ohio) described business tax breaks as more of the “same old, same old” this week.

The Senate could introduce a $104 billion jobs bill shortly that includes a payroll tax credit for businesses that accept new hires between Feb. 3, 2010 and Jan. 1, 2011. The provision emerged from a proposal by Sens. Orrin Hatch (R-Utah) and Charles Schumer (D-N.Y.) and is similar to the suggestion by President Barack Obama to give businesses a $5,000 tax credit for each new worker added to its payroll.

A draft of the bill also calls for a $1,000 increase for hiring-related tax credits. To qualify, workers must be hired in 2010 and be employed for at least 52 consecutive weeks. The credit cannot be used in years prior to the bill’s enactment. But the draft offers no guidance on applying unused portions of the credit to future years, indicating outlays for the bill could extend beyond the current year.

The bill is presently expected to cost $85 billion the first year and $19 billion the second year. But lobbyists say Senate leaders want to trim its price tag to win Republican support for the legislation.

Once the Senate unveils its bill the House will follow suit with a similar proposal, staffers said.  Talks between chamber leaders have taken place on the bill to help ensure a bicameral consensus and quick passage of the package.