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House approves tax-cut plan for small businesses

The Republican-controlled House voted Thursday to extend new tax cuts to businesses with fewer than 500 employees, a vote designed to contrast with a Democratic push this week to impose higher taxes on those making more than $1 million a year.

The measure was approved on a largely party-line vote of 235 to 173, with both parties contending that the GOP-backed measure is a perfect foil to Democrats’ efforts to pass the “Buffett rule,” which the Senate blocked on Monday.

In the House vote Thursday, 18 Democrats joined Republicans in supporting the measure, while 10 Republicans opposed it.

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

Senate Democrats introduced a counterproposal Thursday that would give a 10 percent tax break only to companies that hire new employees or increase wages. The measure also would allow businesses to write off major purchases to encourage investment in new infrastructure.

House Majority Leader Eric Cantor (R-Va.), who has 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 allow companies 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 will veto it if it passes. 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 with fewer than 500 employees.

Sen. Charles E. Schumer (D-N.Y.) said the House vote was a sign that “millionaire’s week” had arrived on Capitol 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 to businesses that hire new workers would amount to picking winners and losers.

Neither party showed eagerness to negotiate a compromise. 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,” because the White House has signaled support for helping small businesses.

Rosalind Helderman is a political enterprise and investigations reporter for the Washington Post.
Ed O’Keefe is covering the 2016 presidential campaign, with a focus on Jeb Bush and other Republican candidates. He's covered presidential and congressional politics since 2008. Off the trail, he's covered Capitol Hill, federal agencies and the federal workforce, and spent a brief time covering the war in Iraq.

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