President Obama has proposed creating a tax incentive for small businesses that hire new employees even as Congress tries to figure out how such a deal would work.

There is no question that creating a tax incentive for small businesses that hire workers or increase payroll would help the economy.

Lawmakers on Capitol Hill have been working for months on ways to develop small business tax incentives and give small businesses tax help in a way that it won’t be abused.

Obama and Congress have both been vague on how the tax break would work and how it would be administered.

“I believe it’s worthwhile to create a tax incentive to encourage small businesses to add and keep employees and I’m going to work with Congress to pass one,” Obama said.

With the 2009 year ending, Congress is running out of time to pass a jobs package this year, and the process will be even more complicated if the administration doesn’t come up with details. Moreover, the Senate is preoccupied with the health care debate, making any action less likely.

The Obama administration is expected to propose extensions and enhancements tax credits and tax breaks that were part of the federal economic stimulus package passed in early 2008.

Obama also proposed eliminating capital gains taxes on small business stock, if it is purchased in 2010 and held for at least five years, expanding a tax break enacted in the stimulus package.

While Obama and the Democrats focus on health care reform, Republicans believe the focus should be on getting Americans back to work. Unemployment rates currently stand at 10 percent.

Tax experts ponder how a small business tax break for hiring working would work. Do you give a tax break just for hiring more employees, or do companies have to simply increase payroll? How long do the companies keep the workers? How do you enforce the requirements?

“You’re trying to subsidize people for doing things they wouldn’t otherwise do, but we don’t know what they would otherwise do,” said Eugene Steuerle, a Treasury Department official in the Reagan administration who is now co-director of the Tax Policy Center, a Washington think tank.

John H. Bishop, an economist and a professor at Cornell University, has a proposal for extend tax credits to companies that increase payroll subject to Social Security taxes. Since only the first $108,600 of a worker’s pay is subject to Social Security taxes, executives couldn’t get the credit by giving themselves big bonuses, he said.

Bishop’s small business tax credit proposal would help the economy if companies either raise the pay of existing workers or hire new workers. Bishop’s proposal, modeled after a similar tax credit enacted in the 1970s, has been circulating on Capitol Hill for several months.

“It does exactly what we want,” Bishop said. “It focuses on hiring Americans to work now.”

source: The Associated Press 2009

President Obama’s treasury secretary and chief economic adviser admit they cannot rule out raising taxes on middle-class Americans to curb the soaring budget deficit and fund health care reform.

With more federal spending expected on the economic stimulus package, extended unemployment benefits and health care reform, revenue sources to cover these expenses just aren’t available.

The Obama administration is treading lightly on the issue of raising of taxes to calm the public. Both Treasury Secretary Timothy Geithner and National Economic Council Director Larry Summers sidestepped questions on the President’s intentions about taxes. Geithner said the White House was not ready to rule out a tax hike to address the federal deficit; Summers said Obama’s proposed health care overhaul needs funding from somewhere.

President Obama vowed “you will not see any of your taxes increase one single dime” during his presidential campaign. But the simple truth is the federal spending on economic recovery combined with an ambitious plan to revamp American health care – will have to be paid for.

On Friday, the government released a report that suggests the worst U.S. recession since WWII appears to be ending. But President Obama cautioned about a quick turnaround.

“Well, as I’ve said, I think we maybe are beginning to see the end of the recession, but it’s still going to be some time before we are seeing companies hiring again. That’s usually the last thing that happens,” Obama said in an interview with Univision that aired on Sunday.

“So I think we are still going to have a tough remainder of the year — probably until next year — but, you know, at least what we are seeing — we’ve pulled back from the possibility of a depression. That’s not the danger.”

Private economic forecasters suggest that unemployment will come down in the second quarter of 2010 with positive growth in the latter half of 2009.

But at the same time, Geithner and administration officials are pondering how to ask Congress for more funds to extend unemployment benefits for Americans who have recently lost their jobs. The proposal drew some support from Sen. Jim DeMint, R-S.C., as long as the benefits come from the already approved economic stimulus package.

Opponents of the plan question whether the proposal will benefit the country.

Senator John McCain stated, “I think it’s pretty clear, if you pump trillions of dollars into the economy, you will see some recovery,” the Arizona Republican said while giving Obama credit for the improvement. “But the long-term consequences, I think, are going to be, unfortunately, devastating unless we do something about it.”

Geithner and Greenspan appeared on ABC’s “This Week.” Summers appeared on NBC’s “Meet the Press” and CBS’s “Face the Nation.” DeMint was interviewed on “Fox News Sunday.” McCain spoke with CNN’s “State of the Union.”

source: Associate Press

The agreement on the Obama Stimulus Plan makes Barack Obama the first president to ever have such a significant economic stimulus package passed by both Houses in such a short period of time. It is the biggest economic relief package since FDR’s “New Deal”. But what does it mean to the average American?

The almost $800 billion stimulus package means that lower and middle-income taxpayers will get an extra $13 a week in their paycheck this year and about $8 more a week next year. Unemployment checks will go up $25 a week and will keep coming even longer. There are thousands of dollars of tax breaks for new home buyers and people buying new cars. Food stamp benefits will rise for 30 million Americans and short-term health insurance will become more affordable for many losing their jobs.

Obama’s economic stimulus package breaks down to $280.8 billion in tax cuts, $308.5 billion in discretionary spending and $198 billion in Direct Spending. Here’s how that breaks down:

Tax Cuts

• $280.8 Billion

Discretionary Spending

• $61.1 billion in Transportation, Housing/Urban Development
• $53.6 billion in State and local school grants
• $50.8 billion in Energy and Water
• $43.9 billion in Education
• $26.4 billion in Agriculture
• $25.8 billion in Depts of Labor and Health and Human Services
• $10.5 billion in Environment
• $36.4 billion in Other spending

Direct Spending

• $90 billion in Medicaid
• $57.3 billion in unemployment, compensation and other programs
• $25.1 billion in Cobra subsidies
• $20.8 billion in Health information technology
• $4.8 billion in other spending

Many in Washington are heralding this stimulus package as a sure winner for America. But the ugly truth about the Obama stimulus plan is that the average American had to take it on the chin in order for the stimulus package to pass. The original plan called for a $15,000 tax credit to first time homebuyers – that was cut from plan. Buyers can still get up to $8,000 tax credit – but it’s really a tax-free loan to be paid back by the home buyer over 15 years. And any potential tax savings on reducting car loan interest from your income tax was also slashed from the stimulus package.

Pork barrel spending is also stuffed into this stimulus packages. Senate Majority Leader Harry Reid (D-Nevada) was able to allocate a big chunk of the $8 billion to construct high-speed rail lines could go to a Los Angeles to Las Vegas route. And Arlen Specter (R -Pennsylvania) make sure $10 billion was set aside for one of his priorities, the National Institutes of Health.

While the deal-making was going on, the Republicans fought for tax cuts while the Democrats wanted spending. You know who won – Nancy Pelosi and the Democrats.

So in a nutshell, the celebrated Obama stimulus package does little for the average American. You think that $13 more dollars a week is going to make a difference to the average American? This will help spread the gap between the haves and the have-nots in America.

This is NOT a stimulus package, instead, it’s a stability package to keep America from going into Depression – that’s right Depression!

Where are all the new jobs coming from? And what about the bill that our children will have to pay?

It’s typical politics – nothing has changed in Washington – and probably never will.