The Stimulus Plot Thickens: Tax Break Changes Now on the Table

February 6, 2009 9:26 a.m.

The complicated state of the Senate stimulus debate just got more intense.

Sen. Olympia Snowe (ME), one of the four Republicans considered genuinely open to cooperation with Democrats on a workable economic recovery bill, just released a statement saying she was approached by Majority Leader Harry Reid (D-NV) to come up with a list of trims from the $275 billion-plus tax section of the stimulus.

To be clear, this is separate from the $80 bilion-plus package of spending cuts that are being hashed out by a group of 15 or so centrist senators from both parties.

Pruning the tax section of the stimulus is an idea that could hold promise for liberals, many of whom are concerned about the hits that education and transit would take in the centrist senators’ package of cuts. The portion Snowe is looking at contains plenty of cuts, for both businesses and individuals — some of them added in the hopes of winning GOP support — but also a number of tax credits that could take money out of government coffers in the short term while increasing economic growth in the long term.

All told, trimming the tax section while retaining its (partially questionable) economic benefits is a tricky balance, but one Snowe is uniquely qualified for as a popular member of the Finance Committee. Speaking of, senator, may I suggest that $15 billion could be saved by eliminating the questionable “carryback” tax credit extension?

But adding tax changes to the mix adds a new obstacle to Reid’s goal of passing the stimulus by day’s end.

Fundamentally, the talks at this point hinge on keeping enough Democrats on board with the proposed spending cuts while firming up the commitment of the 2-4 Republicans needed for passage. In the words of one of those GOPers, Arlen Specter (PA), “If [Reid] had [the votes], he would have used them last night.”

Snowe’s full statement is after the jump.

I was approached this morning and asked to work directly with leadership to amend the tax section of the stimulus bill in order to develop compromise language that could pass the Senate. The total reductions sought by leadership will closely resemble the amount I recommended to the President during our meeting on Wednesday. This is a critical time for our nation. Our economy shed another 598,000 jobs last month – the most since 1974 – propelling the national unemployment rate to 7.6 percent. Until we deliver to the American people an economic stimulus package that spurs significant job creation and helps those most affected during these trying economic times, I will continue to work, as I have for months, with leadership and the Administration.

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