Days after House Republicans introduced legislation to reduce taxes for small business owners, Senate Democrats have responded with a competing proposal. Both measures would provide tax relief for employers through the end of the year but under different terms and with varying restrictions.
The Senate plans to introduce its bill in the coming weeks, but here’s what we already know about both proposals:
Sponsor: Rep. Eric Cantor (R-Va.)
Proposed tax cut: 20 percent, capped at 50 percent of employee wages
For who: Businesses with fewer than 500 employees (22 million firms)
Total tax savings/cost to the government: $46 billion
The fine print: The Republican bill would extend a tax cut to any company that falls underneath the employee cap, regardless of industry, revenue or business structure. Critics have complained that those parameters would give tax relief to high-wealth firms like hedge funds and professional sports teams, but Rep. Cantor argues the bill hits “right to the heart of job creation” by allowing all small employers to retain more capital with which to hire and grow their firms.
Sponsors: Sens. Harry Reid (D-Nev.) and Chuck Schumer (D-N.Y.)
Proposed tax cut: 10 percent, capped at $500,000
For who: Businesses that expand their payrolls by adding employees or increasing wages
Total tax savings/cost to the government: $26 billion
The fine print: The Senate bill places no restrictions on the size or type of company that qualifies for the tax relief, but by capping the credit at $500,000, the impact would be felt much more heavily by small companies than large corporations, according to a spokesperson for Sen. Schumer. The bill would also temporarily renew bonus depreciation for small employers, allowing them to write off equipment investments this year rather than over the course of several years.
Which proposal would work best for small businesses? Share your take in the comments below.