There are signs of capitulation — or at least there is some clarification — coming from Sen. Olympia Snowe (R-Maine), the GOP member Democrats believe to be most likely to vote for the jobs bill, also known as the tax extenders package or H.R. 4213. Nothing is certain. But today, she explained that Sen. Harry Reid (D-Nev.) did not make promised changes regarding how the government taxes “S corporations” overnight, and therefore she would not vote for the package as is.
Snowe has long opposed the tax change for S corporations. For instance, two weeks ago she made this statement on the provision:
“At a time when Congress continues to dither on enacting a small business jobs bill, Section 413 is a poison pill in this tax bill, robbing American small businesses of the capital they need to create new, good-paying jobs,” Senator Snowe said. “Indeed, this is a job-killing tax hike that will force entrepreneurs across the nation to retrench and reconsider any plans for hiring employees or expanding their business.”
“Congress should not be taking from David to pay Goliath. The original bill would have raised taxes on Wall Street, but when Wall Street howled, lawmakers went looking someplace else — small businesses. They aren’t as able to defend themselves when the tax man cometh,” Enzi said. “This isn’t a loophole. The IRS already has the tools its needs to ensure proper compliance with self-employment taxes. This is a solution in search of a problem.”
H.R. 4213 would impose payroll taxes (15.3 percent) on S Corporations on the dividend distributions paid to employee-owners, to family members who are shareholders or partners, and on retained earnings in the business.
She has agreed to vote on the unemployment benefits extension as a standalone bill, without offsets. I think that means Democrats could move the rest of the bill, which would not increase the deficit, as well.