Democratic tax credit bill aids poor, cuts corporate breaks

WASHINGTON Wed Mar 26, 2014 1:47pm EDT

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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)

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Comments (21)
SunnyDaySam wrote:
Finally! Fairness has been a LONG time coming! Why should hedge fund managers get special tax breaks that a trucker doesn’t? It’s never made any sense. btw; it’ll be fun watching the Republicans try to defend the Corporate tax breaks over Average Americans.

Mar 26, 2014 2:09pm EDT  --  Report as abuse
Pumuckl wrote:
The idea that income inequality can be addressed by reducing the earnings of the wealthy is simplistic at best.
We should rather be addressing the imbalance between available job positions and people to fill them. As in all commodities it IS a question of demand. Whenever there are more people than positions available the wage median paid is low but when the inverse is so then the median wage is high.
The birth of the middle class (in medieval times) only came about after the plague removed a significant percentage of the population and the Nobles (land owners) were forced by scarcity of labor to pay more in order to entice workers. This in turn gave rise to significant growth of universities and the Renaissance. The same can be said for the Restoration, post the Hundred Years war etc.
This issue can only be addressed properly when the aging demographics coupled with jobs imbalance are brought into the conversation. Wealth redistribution all not bring about a lasting change (history shows that it never lasts).

Mar 26, 2014 2:36pm EDT  --  Report as abuse
tatman wrote:
BRAVO, Sen, Murray!

Mar 26, 2014 2:52pm EDT  --  Report as abuse
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