(CBS/AP) WASHINGTON Senate Democrats Monday unveiled a $26 billion temporary tax cut for businesses to boost their payrolls and encourage investment in new equipment.
The legislation would award businesses a tax credit of 10 percent on the salaries of new hires or for pay raises given to existing workers. Businesses that make major new capital investments in new equipment and machinery would be able to write off those investments immediately rather than over several years.
The idea is to both boost hiring and investment as the fragile economic recovery continues to take hold. The tax cuts would be temporary and apply to 2012 wages and investments.
The legislation is jointly backed by top Democratic leaders, including Majority Leader Harry Reid of Nevada and Sen. Charles Schumer of New York, who briefed the media on a conference call.
The Democratic proposal comes a few days after House Majority Leader Eric Cantor, R-Va., proposed a $46 billion, one-year tax cut for smaller businesses. The GOP measure would allow businesses with fewer than 500 employees -- or 99.9 percent of the nation's companies -- to deduct 20 percent of their income from their federal tax bill.
Democrats said their idea was better because it's focused on creating jobs.
"The House Republican proposal is neither focused on true small businesses, nor does it make the tax cut dependent at all on the company doing any hiring," Schumer said.
In fact, the Congressional Budget Office says that simply cutting business income taxes is an inefficient way to boost jobs. But at the same time, so-called bonus depreciation on business investment isn't especially efficient at boosting the economy, either.
Neither the Republican nor Democratic ideas would be "paid for" with spending cuts or revenues gleaned elsewhere from the tax code.
Reid and Schumer predicted the measure could pass the Senate in the coming weeks.
"This is the kind of legislation that should not be a fight," Reid said.
Later Monday, the Senate appears likely to set in motion a debate on legislation to repeal tax breaks for the five biggest oil companies.