WASHINGTON -- In the battle to claim the mantle of responsible tax-cutters, Senate Democrats offered a plan Monday that competes with a House Republican push to give small businesses a 20 percent tax holiday.
The GOP plan, sponsored by House Majority Leader Eric Cantor (R-Va.), would apply to any business that has fewer than 500 employees, including hedge funds, celebrities and, indeed, about half of the 400 richest Americans, who average some $100 million a year in business income.
Cantor's $46 billion proposal would grant a 20 percent small business tax cut for a year. The break would be capped at 50 percent of a firm's total salary costs or payments to relatives and minor owners, whichever is greater.
On Monday, Senate Majority Leader Harry Reid (D-Nev.) and policy maven Sen. Chuck Schumer (D-N.Y.) said that in the coming weeks they would introduce a bill that would give small businesses a 10 percent tax credit for any new hiring or raises in 2012 and would allow them to write off the entire cost of new capital investments that go to expanding their operations.
"Our tax cut is targeted to help small businesses, while Republican efforts are just camouflaged handouts to the wealthiest in America," said Reid on a conference call with reporters.
"The House Republican proposal is neither focused on true small businesses, nor does it make the tax cut dependent on the company doing any hiring," said Schumer. "The House proposal would give tax cuts to sports franchises, celebrity companies that don't need the help and in some cases have billions of dollars of revenue.
"Our proposal is much more targeted at actual job creation by true small companies, rather than giving just tax breaks to millionaires and billionaires who don't heed it," Schumer added. "We're sort of used to this. Republicans think the best way to grow jobs is to help millionaires and billionaires keep more of their dollars."
Democrats pointed to a recent Treasury Department study that suggests investment write-offs, or "bonus depreciation," dramatically lowers capital costs and spurs investment spending. They also noted Congressional Budget Office estimates that suggest tax credits for new hiring have a positive impact.
The Democratic plan would cap the hiring tax break at $500,000, based on a maximum increase in new-hire wages of $5 million per employer.
Democrats estimated their overall plan would cost $26 billion for the year.
Schumer said it would be "unimaginable" for Republicans to oppose the measures, and Cantor's office at least hailed the depreciation proposal, which Republicans had flagged as a bit of common ground they could find with President Barack Obama when he offered a similar idea last fall. But Cantor's office also stood by Cantor's plan.
"We're glad to see Senators Reid and Schumer agreeing that we need to focus on cutting taxes and red tape on small businesses so that our nation's job creators can grow and hire again," said Cantor spokeswoman Laena Fallon. "Leader Cantor's small business tax cut would allow nearly 22 million small businesses to keep more of their hard-earned dollars to invest, grow and create new jobs."
Fallon added that Republicans had pushed for the depreciation measure in December.
Michael McAuliff covers politics and Congress for The Huffington Post. Talk to him on Facebook.
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Posted: 03/26/2012 3:41 pm