A $29 billion small business tax cut plan pushed by Senate Democrats survived a test vote Tuesday — but it has virtually no chance of passage in the Republican-controlled House.
Senators agreed to proceed to debate on the measure, 80 to 14, surpassing the 60-vote threshold necessary. But several Republican senators said they would support final passage of the measure only if Senate Majority Leader Harry M. Reid (D-Nev.) permits them to introduce amendments.
The plan would provide tax cuts this year to companies that hire new workers, give raises or buy new equipment this year. The proposal caps tax credits at $500,000 for firms who exceed their 2011 payrolls by up to $5 million this year. Companies also would be able to deduct the entire cost of major new property and equipment purchases this year; currently companies may only deduct half the amount in a single year.
Republicans opposed to the measure don’t like its narrow focus on relief for smaller businesses, but Democrats argue that the targeted cuts are needed to spur broader job creation.
“This tax cut is not a cure-all, but it could be a difference-maker for small firms on the fence about adding payroll,” said Sen. Charles E. Schumer (D-N.Y.). “After last month’s sluggish jobs numbers, we may be on the verge of a rare moment of agreement on how to help the economy.”
Ahead of the vote, Schumer’s office released a new independent study suggesting that the tax credits could help create roughly 1 million new jobs. The credits for new payroll would create roughly 483,700 new jobs and the bonus depreciation would add another nearly 498,000 positions, according to the report by Regional Economic Models Inc., which conducts economic modeling for state and local governments.
“If my friends on the other side of the aisle truly care about small businesses, as I know they do, then they should join us in stopping these tax hikes that will hit those very same people if the President has his way. If small businesses need help then the best thing we can do is stop all the tax increases,” Hatch said.
The test vote came the day after President Obama called for an extension of the George W. Bush-era tax cuts for the middle class, setting up an election-year showdown with Republicans on taxes. Though the president has always supported higher taxes for higher earners, renewing his push to cut taxes for Americans earning $250,000 or less just four months before the election is clearly designed to force the issue amid a broader debate about the economy.
House GOP leaders plan to hold a vote next Monday on a one-year extension of the tax cuts for all income earners, and they have said that Obama’s plan would raise taxes on small-business owners.
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