Senate Finance Panel Democrats Scornful Of Obama Tax Cut Plan

Senate Finance Panel Democrats Scornful Of Obama Tax Cut Plan
   By Martin Vaughan    Of DOW JONES NEWSWIRES  

WASHINGTON -(Dow Jones)- President-elect Barack Obama's tax cut proposals have fallen flat with a number of key Senate Democrats, who Thursday heaped scorn on some important parts of Obama's plan to revive the economy.

Following a closed-door meeting of the Senate Finance Committee, panel Democrats say they want to direct more stimulus dollars to infrastructure spending instead of tax cuts for individuals, which they said might not help spur the economy.

"I'd rather spend the money on infrastructure, direct investment, and energy conversion," said Sen. John Kerry, D-Mass.

When asked about specific tax cut proposals made by Obama, Kerry said, "I think there are cuts that are not going to stand the test of whether they will create jobs."

Coming in for specific criticism were an Obama plan to give companies a $3,000 tax credit to offset the cost of new hires, and a $500 tax credit for workers that would be spread out over a period of time in take-home pay.

"Is a $3,000 tax credit going to get you to hire somebody to build cars that nobody's buying?" asked Sen. Kent Conrad, D-N.D., speaking to reporters after the committee meeting.

Conrad also said he believes the tax credit for individuals will not produce the greatest benefit for the economy, because people will sock the extra paycheck money away rather than spend it.

Sen. Judd Gregg, R-N.H., echoed those concerns Thursday during a Senate Budget Committee hearing. "People are in such a shell with their concerns about the future that they're just going to save it," he said.

Obama proposed a $500-per-worker tax credit, or $1,000 for married couples when both partners are working, that would be delivered by reducing paycheck withholding, for an increase between $20-$40 in take-home pay.

Obama first proposed the worker tax credit during the presidential campaign, but transition aides this week said including it in the stimulus package for a temporary period would serve as a quick "down payment."

The proposal for a $3,000 tax incentive for firms to hire or retain workers also originated during the campaign, and was put forward by the Obama team to Congress for inclusion in the stimulus package.

Democrats will have a chance later Thursday to query Obama officials directly regarding stimulus proposals. Larry Summers, Obama's pick for director of the National Economic Council, and Obama economic adviser Jason Furman will speak to the full Senate Democratic Caucus.

Finance Committee Democrats said that part of their skepticism is because there is a higher bar to ensure stimulus spending will really help the economy, after the troubled implementation of the $700 billion financial rescue bill.

"This is the first bill post-bank bailout," said Sen. Ron Wyden, D-Ore. "Congress is really going to have to use a sharp pencil to make sure that this money is not frittered away."

"People are pretty skeptical. I don't care who is in the administration, there's going to be a lot of pushback," added Conrad.

Business tax breaks proposed by Obama, including extending faster depreciation and broadening net operating loss carryback rules, appear to have more support among Finance Committee members for inclusion in the stimulus package.

Finance Committee Chairman Max Baucus, D-Mont., stressed that discussions on the package are just beginning. "This is an early part of the whole process, and many senators will be asking a lot of questions."

Baucus said that he is looking "very tentatively" to the week of Jan. 19 for formal Finance Committee action on the stimulus plan.

-By Martin Vaughan, Dow Jones Newswires; 202-862-9244; [email protected]

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(END) Dow Jones Newswires

January 08, 2009 13:25 ET (18:25 GMT)

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