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Small Business Tax Cut Would Help Stars, Hedge Funds

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TAX CUTS
House Majority Leader Eric Cantor proposed a major tax cut for small businesses. | Getty Images

WASHINGTON -- House Majority Leader Eric Cantor on Wednesday unveiled a $46 billion economic stimulus bill that would cut taxes for small businesses -- and offer a windfall for wealthy celebrities and hedge funds.

The Small Business Tax Cut Act would grant a one-year 20 percent cut on taxes paid by small businesses, defined by the federal government as companies that employ fewer than 500 people.

"We need to help our small businesses. That's what this does," said Cantor (R-Va.) at a Capitol Hill news conference. "We hope it will go forward in a bipartisan manner, just like the JOBS Act went through the House, because I don't think any of us can disagree that right now especially is the best time to help small-business men and women."

Cantor's bill removes a restriction that, in previous versions of the legislation, would have barred certain highly compensated professions -- such as finance, law and health -- from receiving the tax cut. The change allows people such as hedge fund managers, corporate lawyers, surgeons and celebrities to qualify for the break. Donald Trump and Oprah could qualify, for instance.

"In the first version, they were kept out, but in this one, they're in," said Chuck Marr, a director at the left-leaning Center on Budget and Policy Priorities. "This is really just a tax cut for the richest people in the country."

In fact, of the 400 richest taxpayers in the United States, 202 would qualify for the break, according to 2008 statistics from the Internal Revenue Service. Those 202 taxpayers had average business income of $106.7 million.

But Cantor defended the move.

"As far as excluding businesses, which one may or may not approve of their legal activities, we don't make those distinctions when we're talking about corporate rates or individual rates," Cantor said.

He argued that businesses with few employees would not be able to take too much advantage because the tax break is capped at 50 percent of what the company pays to its workers or to its minor owners and family members who work for the business, whichever is greater.

"So there's not going to be a potential for that kind of abuse," Cantor said. "We're really about trying to help the small business owners who are out there working every day, and it just seems the government has got in the way. And we're just trying to provide them with some relief."

Cantor also defended proposing a $46 billion bill that would not be paid for.

"We in our budget provide for trillions of dollars in mandatory savings that help resolve the budget deficit and increasing debt in this country," he said. "We don't feel it's appropriate to burden small businesses, and that's why we are going forward with this bill."

CORRECTION: An earlier version of this story understated the income figures for the richest Americans.

Michael McAuliff covers politics and Congress for The Huffington Post. Talk to him on Facebook.

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