President-elect Barack Obama reportedly plans to modify several of the tax break proposals that his transition team has been planning for the economic stimulus package after encountering resistance from key lawmakers.
One such proposal would give companies a $3,000 tax credit for every job they create or decide not to cut. Senators John Kerry, D-Mass., and Charles Schumer, D-N.Y., have expressed skepticism about the tax break, according to The Washington Post. Critics have pointed out that companies could easily manipulate their reporting of projected job cuts.
Another tax break that could hit the chopping block is one that would allow companies to deduct more of their recent losses as the costs could prove to be prohibitively expensive. If implemented, the tax break would enable companies to offset the loss for a tax year with income from the previous two years.
Also likely to be modified is a payroll tax cut of $500 per year for individuals and $1,000 per year for couples. Lawmakers have argued that the tax cut would be too small to stimulate spending if spread out over 52 weekly paychecks and should instead be timed to give wage earners incentive to spend more at one time.
Not all the changes will involve tax cuts. Obama reportedly plans to stop the phase-out of the estate tax and leave the tax at its current level. The estate tax was slated to disappear entirely in 2010. However, the Senate Finance Committee is expected to move to reverse a 2001 law that gradually rolled back the estate tax, according to The Wall Street Journal. At its current level, estates of $3.5 million for individuals and $7 million for couples are exempt from the estate tax. Estates above those levels are subject to a 45 percent tax.
Meanwhile, Obama is urging lawmakers to release the remaining $350 billion in the $700 billion bailout package. "I felt that it would be irresponsible for me, with the first $350 billion already spent, to enter into the administration without any potential ammunition should there be some sort of emergency or weakening of the financial system," he said, according to Reuters.
Obama said he wants to use the money to help small businesses and to stem the tide of home foreclosures.
A bill sponsored by House Financial Services Committee Chairman Barney Frank, D-Mass., would place more stringent conditions on the rest of the money in the Troubled Asset Relief Program and require the Treasury to take significant steps to reduce foreclosures. Lawmakers in both parties have criticized the TARP program for failing to do more to help homeowners and not forcing banks to disclose how they are using the money. Frank's bill would require stricter monitoring and agreements on how the funds are used by financial institutions and sets aside $40 billion for foreclosure mitigation.
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