Senate approves tax breaks for new hires

WASHINGTON (AP) - Senate Democrats delivered the first of several promised election-year jobs bills Wednesday, passing a measure blending tax breaks for companies that hire unemployed workers with highway funding eagerly sought by the states.

The bipartisan 70-28 vote to pass the bill sends it to the House, where many Democrats say it is too puny - and where a revolt was brewing among lawmakers who said its allocation of highway money among the states is unfair. But pressure is on to pass it anyway to score a badly needed win for President Barack Obama and a Democratic Party that's dropped badly in opinion polls and faces major losses in midterm elections.

A spokesman for House Speaker Nancy Pelosi, D-Calif., said the House was on track to pass the bill this week.

It's the first major bill to pass the Senate since the Christmas Eve passage of a deeply controversial health care bill and the subsequent election of Massachusetts Republican Scott Brown, which rocked Democrats by demonstrating their falling standing even among voters who tend to vote Democratic.

Democrats promise additional measures to create jobs, promising help for small businesses having trouble getting loans, aid for cash-strapped state governments, and subsidies for people who make their homes more energy efficient. But budget deficits are a worry, and future measures are going to be more difficult to pass - especially since a top Senate Democrat has blocked unused authority from the Wall Street bailout program from being used to "pay for" jobs initiatives.

The bill contains two major provisions. First, it would exempt businesses hiring the unemployed from the 6.2 percent Social Security payroll tax through December and give them an additional $1,000 credit if new workers stay on the job a full year. The Social Security trust funds would be reimbursed for the lost revenue.

Second, it would extend highway and mass transit programs through the end of the year and pump $20 billion into them in time for the spring construction season. The money would make up for lower-than-expected gasoline tax revenues.

Some House Democrats complained that the Senate bill would unfairly favor states like California and Illinois at the expense of almost every other. But Pelosi spokesman Brendan Daly said lawmakers were working to resolve the issue.

"We are on a path to move forward this week," Daly said in an e-mail.

The Senate's $35 billion proposal - blending $15 billion in tax cuts and subsidies for infrastructure bonds issued by local governments with the $20 billion in transportation money - is a far smaller measure than the $862 billion economic stimulus bill enacted a year ago.

The measure cleared a key hurdle Monday when Brown and four other Republicans broke party ranks to defeat a filibuster. Republican leaders said Majority Leader Harry Reid, D-Nev., had used strong-arm tactics to bring the measure to the floor.

Brown took considerable heat from conservative commentators and bloggers for his Monday vote, though 12 other Republicans voted for the bill on Wednesday. Sen. Ben Nelson of Nebraska was the only Democrat in opposition.

Sen. Judd Gregg of New Hampshire, top Republican on the Senate Budget Committee, blasted the measure for increasing the budget deficit to fund highway and transit programs. He said the measure made a joke of Democratic promises to adhere to "pay-as-you-go" budget rules requiring new spending programs to not increase the deficit.

"I don't think you get people back to work in this nation by loading more and more debt onto the next generation," Gregg said.

The bill would be paid for in part by a crackdown on international tax cheats, an issue the Internal Revenue Service and the Obama administration have embraced.

The new hiring tax credit could spur about 250,000 new jobs, according to economist Mark Zandi of Moody's Economy.com. The economy has shed 8.4 million jobs since the recession began in December, 2007.

Sen. Charles Schumer, D-N.Y., a sponsor of the hiring tax break, said it would have an immediate impact since businesses won't have to apply for it when doing their taxes a year from now.

"It immediately takes effect," Schumer said. "It goes right to small businesses."

In addition to the hiring tax incentives and highway funding, the bill would extend a tax break for small businesses buying new equipment and modestly expand an initiative that helps state and local governments finance infrastructure projects.

Before lawmakers can pass more jobs legislation, the Senate will have to first approve a stopgap measure to continue the help for the unemployed and doctors in the Medicare program that Reid had dropped from the earlier jobs legislation. The help currently expires on Feb. 28.

Reid has promised to advance longer-term help for the unemployed and a host of other measures as early as next week.

Senators acknowledged that the bill passed Wednesday will not put a huge dent in the nation's unemployment rate.

"This package is not a panacea. It's not going to solve everything," Schumer said. "But because we have a jobs agenda, not just a jobs bill, we will keep at it and at it and at it."