The U.S. Senate approved legislation to cut taxes and ease credit for small businesses in a long-delayed victory for Democrats eager to show voters they are working to create jobs.
The legislation, passed 61-38, would create a $30 billion lending program and provide small businesses with $12 billion in tax breaks, including more generous write-offs for equipment purchases. The measure goes to the House for a final vote before being sent to President Barack Obama for his signature. The House will take it up next week, said Nadeam Elshami, a spokesman for Speaker Nancy Pelosi.
The plan will probably be the last major jobs bill to clear Congress before the Nov. 2 elections.
The measure was held up for months by Republicans who said it amounted to a miniature version of 2008’s Troubled Asset Relief Program, with insufficient safeguards to ensure that taxpayers recoup the loans. Democrats broke a filibuster two days ago with the help of retiring Republican Senators George Voinovich of Ohio and George LeMieux of Florida.
“Reinvigorating our economy in the short run and rebuilding it over the long term is not a one-step process,” Obama said today. “But this is a critically important one and I am grateful to those senators on the Republican side of the aisle willing to take this vote on behalf of America’s small-business owners.”
Lawmakers turned aside a Republican bid to attach provisions extending a tax credit for private research and development programs.
Senate Finance Committee Chairman Max Baucus, a Montana Democrat, called the effort a “stunt,” saying lawmakers need more time to work on the proposal. He said senators will take the matter up later this year.
The lending bill is designed to help small business owners who have seen the value of real estate and other types of loan collateral sapped by the recession, said Michigan Democrat Carl Levin.
“Businesses with plenty of customers, excellent credit histories, have been unable to get the financing they have relied on and need, endangering existing jobs and preventing the creation of new jobs,” Levin said.
Republicans said the program would encourage banks to make risky loans by providing increased subsidies to those that boost lending beyond certain thresholds.
“By rewarding participating banks for issuing a high volume, rather than a high quality, of new loans to small businesses, this fund introduces significant moral hazard into the marketplace,” said Maine Senator Olympia Snowe, the top Republican on the Committee on Small Business and Entrepreneurship.
Senator Bob Corker, a Tennessee Republican, said, “We all need to calm down and let individuals’ balance sheets recover and save and we’ll have demand that’s based on real demand, not artificial demand.”
Bill Rys, tax counsel for the National Federation of Independent Business, said in an interview that small businesses have had “some problem” securing loans. Still, he said the group’s surveys found that businesses are more concerned with poor sales, uncertainty over future tax rates, government regulations and the cost of health insurance.
The new lending program would be reserved for banks with less than $10 billion in assets. Banks would be allowed to drop out of the program without penalty if the government later made significant changes to its rules, said Paul Merski, senior vice president of the Washington-based Independent Community Bankers of America.
That provision is designed to ensure that participants won’t suffer the same fate as those that took TARP money and later found themselves subject to government restrictions on executive compensation, he said.
“It’s a very legitimate concern,” said Merski. “You have a get-out-of-jail free card here.”
Other provisions in the legislation would raise limits and cut fees on loans offered by the government’s Small Business Administration.
The bill would be financed in part by giving individuals more power to shift retirement savings into Roth accounts. In those accounts, contributions are taxed while post-retirement withdrawals are tax-free. That would temporarily boost tax revenue flowing into the Treasury. Under ordinary Individual Retirement Accounts, the tax is paid on the money withdrawn rather than on the contribution.
Lawmakers rejected a proposal earlier this week that would have rescinded a requirement in the health-care overhaul passed this year that small businesses provide more extensive documentation of their purchases to the Internal Revenue Service. Senators were unable to agree on how to make up the tax revenue that would have been lost.
The lending legislation is H.R. 5297.