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Posted at 02:04 PM ET, 04/19/2012

House approves small-business tax cut plan

The GOP-controlled House voted Thursday to extend new tax cuts to businesses with fewer than 500 employees, a vote designed to contrast with Democratic push this week to impose higher taxes on those making more than a million dollars a year.


House Majority Leader Eric Cantor (R-Va.). (Brendan Hoffman - Getty Images)

The measure was approved on a largely party line 235 to 173 vote, with both parties believing that Republican-backed measure is a perfect foil to the Senate’s attempt to pass the so-called “Buffett Rule,” which was blocked Monday.

Eighteen Democrats joined Republicans in supporting the measure; 10 Republicans opposed it.

Republicans contend that their $46 billion tax cut would encourage economic growth by providing new relief to struggling small-business owners. Democrats, however, say the measure will provide new tax breaks to at least some higher-income Americans, particularly business owners who are already performing well.

Senate Democrats unveiled a counter-proposal Thursday to give a 10 percent tax break only to companies that hire new employees or raise wages. It would also let businesses write off major purchases to encourage investment in new infrastructure.

House Majority Leader Eric Cantor (R-Va.), who has aggressively championed the House bill in recent days with a series of high-profile media events, said Wednesday that his Small Business Tax Cut Act would grant firms with fewer than 500 employees tax deductions up to 20 percent of their business income.

“Our 20 percent small-business tax cut goes straight to the bottom line so small-business owners can retain more capital, invest in their businesses and create more jobs,” Cantor said, citing studies suggesting that the tax cuts could help create 100,000 more jobs annually.

The House bill will be set aside by the Senate, and President Obama has said he would veto it if it passed. The White House has said the measure is “not focused on cutting taxes for small businesses, but instead would provide tax cuts to the most fortunate.”

At a news conferences Thursday, Senate Democratic leaders blasted the House proposal as a win for well-heeled celebrities, including Donald Trump and Oprah Winfrey, who operate companies that employ fewer than 500 people.

Sen. Charles E. Schumer (D-N.Y.) said that the House vote was a sign that “millionaire’s week” had arrived on the Hill.

“Their bill is missing a vital two words — new jobs,” he said.

But Republican members of the House Ways and Means committee Thursday said the Senate’s approach would punish businesses that were showing signs of success and were best positioned to hire new workers.

Rep. Kevin Brady (R-Tex.) said targeting tax relief only at businesses that hire new workers would amount to picking “winners and losers.”

Neither party showed eagerness to try to negotiate a compromise between the two approaches and enact new tax cuts for businesses. Instead, it offered the opportunity for a philosophical clash over how to create jobs and who should get tax relief, as Congress enters campaign mode in advance of the November election.

Despite the opposition, congressional Republicans believe introducing modest proposals to help businesses will demonstrate to voters that they have serious ideas for economic development that are being thwarted by Democrats.

Asked Wednesday why Republicans wanted to help firms with up to 500 employees, or why they didn’t limit the tax break to companies with a certain level of income, Cantor said that his bill’s definition of “small business” matches the definition used by the Small Business Administration.

“No more complicated than that,” he told reporters, adding later that “if you look at the numbers, if you look at those who are benefiting, overwhelmingly the beneficiaries are those in the middle class.”

Cantor called Obama’s vow to veto the bill “puzzling,” since the White House has signaled support for helping small businesses.

By and  |  02:04 PM ET, 04/19/2012

 
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