Tax credits, highway funds in Senate jobs bill

WASHINGTON Wed Feb 3, 2010 6:15pm EST

A man listens as others fill out applications during an orientation for a company seeking home health and personal care aides at the New York State Department of Labor in the Bronx borough of New York, February 3, 2010. REUTERS/Shannon Stapleton

A man listens as others fill out applications during an orientation for a company seeking home health and personal care aides at the New York State Department of Labor in the Bronx borough of New York, February 3, 2010.

Credit: Reuters/Shannon Stapleton

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WASHINGTON (Reuters) - With a nervous eye on the November congressional elections, Senate Democrats will unveil tax credits and other proposals on Thursday that aim to bring down the nation's double-digit unemployment rate.

The package will include tax credits to spur hiring and equipment purchases, along with incentives for states to ramp up construction projects, an aide said on Wednesday.

It could also extend soon-to-expire programs that provide unemployment aid and healthcare subsidies for the jobless, the aide said on condition of anonymity.

With Friday's jobs report expected to show a rise in the unemployment rate to 10.1 percent, Democrats in Congress say job creation is their top priority this year.

But they face a growing voter backlash for the aggressive spending measures they took last year to blunt the impact of the steepest recession in 70 years, so the Senate's bill is not likely to carry as steep a price tag as a $155 billion package passed by the House of Representatives in December.

Instead, the Senate is likely to pass several smaller, more targeted measures, Majority Leader Harry Reid said on Tuesday.

The first could come up for a vote next week, Reid said.

Reid will announce details of the legislation at 9:45 a.m. EST (1445 GMT) on Thursday, along with fellow Senate Democrats Dick Durbin, Max Baucus and Byron Dorgan.

A price tag has not been set because the bill could change substantially when it comes up for a vote, the aide said.

Major elements of the legislation include:

* TAX CREDITS TO ENCOURAGE HIRING BY SMALL BUSINESSES

President Barack Obama has proposed a payroll tax credit of up to $5,000 for every net new employee hired in 2010.

In the Senate, Democrat Chuck Schumer and Republican Orrin Hatch would allow businesses to avoid paying Social Security taxes on some new hires for the remainder of 2010.

It is unclear whether the jobs bill will adopt either of these approaches. Both could run into resistance from liberal Democrats who question their effectiveness.

* TAX CREDITS TO ENCOURAGE INVESTMENT BY SMALL BUSINESSES

Reid has suggested extending rules that allow small businesses to deduct more for equipment purchases. Obama has called for the elimination of all capital gains taxes on small business investment. It is unclear whether the Senate's job package includes this approach.

* ROAD CONSTRUCTION

The Senate could shore up the dwindling Highway Trust Fund, which provides state and local governments about $40 billion a year for road and transit upgrades.

Democratic Senator Barbara Boxer said last week that the Senate might provide enough money to ensure that the fund can operate through the end of the calendar year.

That would probably be a more modest step than the $48.3 billion for construction passed by the House in December.

* BUILD AMERICA BONDS

The package could expand a taxable bond program that helps state and local government pay for big projects.

Created as part of last year's stimulus package, "Build America Bonds" give issuers a federal rebate equal to 35 percent of interest costs, making them very popular with issuers. The program expires at the end of this year, but Obama has proposed making it permanent and expanding it at a lower subsidy rate of 28 percent.

* SAFETY-NET SPENDING

Congress temporarily extended unemployment benefits and other safety-net programs that have helped people weather the worst economic downturn since the Great Depression of the 1930s. These programs, which also include food stamps and COBRA health-insurance subsidies for the jobless, will expire at the end of February and will likely have to be renewed again.

(Editing by Doina Chiacu and Eric Walsh)

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