Obama OKs modest tax changes after seeking ideas

Pushed by fellow Democrats, President-elect Barack Obama agreed to modest changes in his proposed tax cuts on Friday after inviting lawmakers to “just show me” ideas for fixing an economy shedding jobs at an alarming rate. Democratic congressional officials said that Obama aides came under pressure in closed-door talks to jettison or significantly alter a proposed tax credit for creating jobs.

Further, Democrats sought inclusion of relief for upper middle-class families hit by the alternative minimum tax. The so-called AMT was originally designed to make sure the very wealthy did not escape taxes, but it now hits many more people because of inflation, despite measures by Congress every year to prevent it from reaching tens of millions of middle-income families.

Congressional officials said aides to the president-elect had agreed to increase the $10 billion originally ticketed for energy tax breaks, although the final total remained unclear. Two officials said at least $20 billion would be reserved, but others indicated it could go higher.

Details were not available, but Obama has spoken in the past about increasing tax breaks for production of alternative energy sources such as wind power. The energy tax provisions make up a small part of a massive economic stimulus bill — expected to reach over $800 billion over two years — that congressional leaders hope to pass before mid-February.

With more than 11 million Americans out of work, Obama pressed Congress for urgent action and said the U.S. is undergoing “a devastating economic crisis that will become more difficult to contain with time.” His warning was underscored by a government report showing that unemployment hit a 16-year high of 7.2 percent in December.

But congressional Democrats are making it clear they want to put their own stamp on the revival plan, despite the inevitable delays. Some Obama ideas, like a $3,000 job creation tax credit, might get scrapped.

Many Democrats aren’t thrilled with Obama’s business tax cut plans and are griping that there’s not enough money in the measure for traditional infrastructure projects like road construction and water projects or for tax credits to promote renewable energy.

Beyond the emerging rifts — and the openness with which Democrats are pushing back against some of Obama’s ideas — is the sheer enormity of crafting such a complex, controversial measure in just weeks. Lawmakers’ insistence on making changes could delay the recovery plan beyond a mid-February deadline declared by House Speaker Nancy Pelosi, D-Calif.

Obama, at a news conference, sought to play down the differences. “There’s no disagreement that the economy is in dire straits,” he said. “There’s no disagreement that we need to create jobs.”

Top Democrats affirmed there is far more agreement than disagreement on the major parts of the recovery plan: aid to cash-strapped state governments, $500-$1,000 tax cuts for most workers and working couples, and a huge spending package blending old fashioned public works projects with aid to the poor and unemployed and a variety of other initiatives.

Obama said he welcomed input from lawmakers in both parties.

“If members of Congress have good ideas, if they can identify a project for me that will create jobs in an efficient way that does not hamper our ability over the long term to get control of our deficit, that is good for the economy, then I’m going to accept it,” the president-elect said.

“What we can’t do is drag this out when we just saw a half-million jobs lost,” Obama said.

“If you can show me that something is going to work, I will welcome it,” he said.

A squadron of Obama officials came to the Capitol on Friday to brief House Democrats on the measure, and they again heard criticism of some of Obama’s proposed tax cuts, particularly a $3,000 credit for job creation. Lawmakers pressed for more infrastructure spending and tax credits to promote renewable energy and said that more needs to be done to address the housing crisis.

“There’s considerable expertise running around the halls of Congress, and this week represents the first, most significant opportunity to have good, constructive dialogue on how we build the best package,” said Rep. Earl Pomeroy, D-N.D.

Obama is promising to ride herd.

“It is my job to make sure that Congress stays focused in the weeks to come and gets this done,” he said.

The top Democrat in Congress is a cheerleader for the Obama plan.

“All of their priorities are ones that we share,” Pelosi said. “We just want to make sure that those (ideas), when they’re written in the bill, are ones that can be used immediately and can create jobs.”

Sen. Barbara Boxer, D-Calif., emphasized areas of broad agreement and the universal sentiment of a need to act.

“Please don’t get the idea there was some sort of breakdown here,” Boxer told reporters.

The details are closely held and subject to change — and the cost of various components seems to be bouncing around daily in the push and pull between the Obama transition team and congressional leaders.

“Spend more on infrastructure. That was a recommendation made in the caucus,” Rep. Pomeroy said. Financial Services Committee Chairman Barney Frank, D-Mass., said money will be added to have state and local governments buy up foreclosed homes.

Boxer said about 20 percent of the bill would provide aid to the cash-strapped states, with 40 percent, or about $300 billion for tax cuts for individuals and businesses. The remaining 40 percent would go to spending programs such as infrastructure, help for the unemployed and renewable energy.

One tax provision would provide a $500 tax cut for most workers and $1,000 for couples, at a cost of about $140 billion to $150 billion over two years. The individual tax cuts may be awarded by withholding less from worker paychecks, effectively making checks about $10 to $20 larger each week.

Source: AP