Democratic tax credit bill aids poor, cuts corporate breaks
WASHINGTON (Reuters) - Democatic U.S. Senator Patty Murray on Wednesday introduced legislation to expand a tax credit for the working poor as requested by President Barack Obama, proposing to pay for it by closing two tax breaks that aid corporations.
With Senate Democrats not pursuing a traditional budget resolution this year, the targeted measure aims to help them draw fiscal contrasts with Republicans, who will consider their own budget plan next month.
Democrats see reducing income inequality as their core issue for November's congressional elections.
Murray's bill would increase the maximum Earned Income Tax Credit for childless workers to about $1,400 from $487 currently and reduce the childless worker eligibility age for the credit from 25 to 21.
It also would create a new tax deduction for low-to-middle income families with two incomes and at least one child, allowing a 20 percent deduction on the secondary earner's income. This would also help increase EITC benefits by reducing earned income for purposes of calculating the credit.
It is not clear whether Senate Majority Leader Harry Reid will move quickly to bring the measure to a Senate vote. A spokesman for Reid said no action had yet been scheduled.
Murray, the Senate Budget Committee chairwoman and a member of Senate Democratic leadership, said the bill would complement Democrats' efforts to raise the minimum wage to $10.10 an hour from a $7.25 federal minimum.
"Struggling families face a lot of challenges to getting ahead today. The very least we can do is keep our tax code from forcing families to take a half-step back for every step forward," she said in remarks on the Senate floor.
The measure, dubbed the "21st Century Worker Tax Cut Act" contains provisions similar to those in Obama's fiscal 2015 budget request released earlier this month. But it has little chance of passage in the House of Representatives, where Republicans who control the chamber want to keep all revenues from the closures of tax loopholes and other breaks to help lower tax rates as part of comprehensive tax reform.
The expanded low income tax credits in Murray's bill would cost $144.9 billion over 10 years, which would be paid for by closing widely criticized tax breaks for corporations and executives.
These include subjecting stock options paid to executives to a $1 million annual cash compensation limit per employee for corporate tax deductions. Companies can now claim larger deductions by paying executives in stock options that do not fall under the cash compensation rule.
The measure also would make changes aimed at deterring companies from shifting U.S. profits to offshore tax haven countries such as Bermuda and the Cayman Islands. It would subject such profits to an effective tax rate of 15 percent unless they were derived from legitimate business operations in a foreign country.
(Reporting By David Lawder)