Big Tax Cuts In The Works

Aiming to foster bipartisan support for his record-setting economic stimulus, President-elect Barack Obama plans to propose huge tax cuts for businesses and middle-class workers that will total about 40 percent of the package, or up to $310 billion, congressional officials said.

The revelation is part of an intricately orchestrated rollout of the plan that includes an appearance by Obama on Capitol Hill on Monday and a major speech about the economy later in the week.

Obama plans to ask Congress for a stimulus package of $675 billion to $775 billion, so the planned tax cuts will total about $270 billion to $310 billion, the officials said.

Obama strategists say he wants to get 80 or more votes in the 100-member Senate, and the emphasis on tax cuts is a way to defuse conservative criticism and enlist Republican support.

But officials say the tax cuts will be based on historical and empirical evidence of what works, not ideology. Rather, the targeted tax cuts will be designed to stimulate job growth in the private sector and help middle class families, the officials said.

For families, the tax cuts include the $500 Making Work Pay payroll tax credit Obama proposed during the campaign.

For businesses, the tax cuts would include breaks for small employers and a “new jobs credit.”

Obama is scheduled to meet Monday with congressional leaders and will update them on what economists have told him about the country’s financial outlook, stressing the imperative for action and his eagerness to work with them on the specifics.

While meeting with the leaders, Obama plans to say that a significant crisis needs a significant response, but one that is disciplined and targeted. The test for components of the stimulus plan will be whether they create jobs, jump-start the economy and lay the foundation for significant long-term investment.

Obama will emphasize his desire for transparency, with oversight and strict accountability, aides said.

Robert Gibbs, the incoming White House press secretary, told reporters as they flew from Chicago to Washington with Obama on Sunday evening: “We’ve seen Christmas sales, consumer confidence and obviously upcoming job numbers which underscore that a very serious situation has only gotten worse and isn't likely to get better any time soon."

The Labor Department is releasing figures Friday that could show the country’s job losses last year were the worst since World War II.

Later in the week, probably Thursday, Obama plans to give a speech in the Washington area taking the case for his package directly to the public, emphasizing the urgency of the crisis and the fact that unemployment could slip over 10 percent if decisive action is not taken.

Obama will talk about the economic crisis and the response it requires, and the setting will be a serious one that will make the appearance very different from a campaign speech, aides said.

The speech is designed as a contrast to the approach taken by President George W. Bush, who has been criticized for not sufficiently explaining his solutions to the economic crisis, including the Wall Street bailout that has now been extended to automakers.

Aides described the speech as part of a carefully planned effort to sell the stimulus package to the country, including nationwide travel by Obama and his inner circle.

About 10 percent of the stimulus package will consist of expansion of unemployment insurance and COBRA health insurance for people whose coverage might otherwise be terminated.

The package also consists of infrastructure investments such as roads and bridges; long-term investments in energy, health care and education; and aid to states, such as more generous Medicaid reimbursement rates.

The proportions those measures will take in the final passage have not been specified.