Obama Shelves Jobs-Credit Proposal

[Mrs. Sharon B. Hodge]

Obama Shelves Jobs-Credit Proposal
Democrats Said $3,000 Tax Incentive Could Be Abused by Businesses
By Shailagh Murray


Bowing to widespread Democratic skepticism, President-elect Barack Obama will drop his bid to include a business tax break he once touted in the economic stimulus bill now taking shape on Capitol Hill, aides said last night.

Obama suggested the $3,000-per-job credit last week as one of five individual and business tax incentives aimed at winning Republican support. He proposed $300 billion in tax relief in a bill that could reach $775 billion, and he resurrected the jobs-credit proposal from the campaign trail as one of his main provisions.

Republicans reacted favorably to the higher-than-expected ratio of tax breaks to spending for road projects, alternative energy production, health-care technology and unemployment benefits. But they offered mixed reviews of his specific tax proposals and floated their own, including cuts in corporate and capital gains taxes.

Stronger opposition came from Democrats, who dismissed the $3,000 credit to employers for every job created or saved as ripe for abuse and difficult to administer. When no champion for the proposal came forward, the president-elect decided to sideline the incentive.

"We've always said we're open to other ideas. This was never set in stone," said a senior Obama adviser of the decision.

Congressional leaders are aiming to deliver a stimulus bill to Obama's desk in the White House by mid-February, but as the process unfolds, the legislation appears to be growing in size and complexity.

The stimulus and a separate financial rescue package, which is also meeting with objections from lawmakers (story, Page A1), are aimed at preventing the economy from sliding further. But Congress has expressed reluctance to rush through such expensive bills without careful consideration of the details.

Even before assuming office, Obama is taking an unusually direct role in legislative efforts to move both bills forward, personally phoning lawmakers and dispatching senior aides to Capitol Hill on a near-daily basis. Today the president-elect will speak to Senate Democrats at their weekly luncheon, and he will soon appear before House Democrats, although a date has not been set, a senior Obama aide said.

Obama expects to meet with Republicans in both chambers, the aide added, although not until after he is inaugurated next Tuesday.

Former Treasury secretary Lawrence H. Summers, who will serve as Obama's chief White House economic adviser, is scheduled to meet this afternoon with House Ways and Means Committee members, to begin crafting tax provisions for the stimulus bill.

Obama advisers said further adjustments may be made to the president-elect's tax priorities, including to a proposed $500 payroll tax credit for individuals. Many Democrats have criticized Obama's idea of distributing the benefit over 12 months, saying it would amount to about $20 per paycheck for workers who are paid every two weeks. They would prefer to distribute the credit over a shorter period.

Obama also has suggested tax incentives for businesses to make capital investments. Such benefits are popular across party lines and have been successful in recent years. But another Obama proposal, to allow companies to deduct larger portions of recent losses, has raised eyebrows on the Hill, where lawmakers see it as a costly reward for behavior that was possibly irresponsible.

Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) announced last week that he would seek to increase unemployment benefits in the plan. Democrats also are floating generous incentives for domestic energy production and for college tuition relief.