(Reuters) - Democratic U.S. senators unveiled a limited jobs-creation bill on Thursday that relies on business tax breaks and construction projects to bring down a stubbornly high unemployment rate.
Following is a summary of key proposals in the bill, which is estimated to cost $15 billion over 10 years. The cost would be offset by closing some tax loopholes, although Democrats have not yet determined which ones.
* HIRING TAX CREDIT. Businesses that hire unemployed workers who have been out of work for at least two months would not have to pay the 6.2 percent payroll tax on these workers that funds Social Security. The government would make up that amount in the workers’ Social Security accounts.
Also, employers also can get a $1,000 tax credit for each of these new hires who they retain for more than a year.
Estimated cost: $13 billion over a decade.
* EQUIPMENT WRITE OFF. Extends expensing thresholds so companies can write off up to $250,000 for certain capital outlays in 2010 instead of depreciating those costs over time. Estimated cost: $35 million over a decade.
* “BUILD AMERICA” BONDS. Allows investors to convert tax-credit bonds — municipal bonds that let certain issuers borrow cheaply — into Build America Bonds.
Build America Bonds, which yield taxable returns, have been popular among investors, driven by a federal rebate. Under the Senate bill, the rebate would equal 45 percent of borrowing costs. Estimated cost: $2 billion over 10 years.
* TRANSPORTATION. Extends the Highway Trust Fund, which helps state and local governments pay for road and transit projects, through December 31. Democrats say this would be funded by reclaiming $19.5 billion in interest the fund had contributed to general government operations. Republican Judd Gregg says that cost should be counted because it would add to the national debt.
* FOREIGN BANK REPORTING. Increases disclosure requirements for foreign banks, investment companies and foreign trusts. Aimed at getting Americans to declare overseas assets. To stop banks from aiding them, foreign financial institutions would be forced to disclose their U.S. customers or face a 30 percent tax on their income from U.S. financial assets. Subjects “dividend equivalent payments” used by investors to avoid dividend taxes to tax. Expected to raise $9 billion over a decade.
* BLACK LIQUOR LOOPHOLE. Eliminates “black liquor” tax break used by paper companies. Such companies have reaped big benefits from the credit, qualifying for it by blending a paper by-product known as “black liquor” with small amounts of diesel, which critics say was not the intention of the law.
Expected to raise $24 billion over 10 years.
* ECONOMIC SUBSTANCE, DIVIDEND TAXES. Clarifies definition of and boosts penalty on business deals that lack “economic substance” to 40 percent from 20 percent. The Internal Revenue Service and the courts challenge transactions it deems were entered into for the tax benefits only. Expected to raise $5 billion over 10 years.
Reporting by Kim Dixon and Andy Sullivan; Editing by Bill Trott and Philip Barbara