04/19/2012 02:12 pm ET

Small Business Tax Break That Helps Wealthy Passed By House

WASHINGTON -- A $46 billion tax break that would go disproportionately to the wealthy and add to the deficit passed the House of Representatives on Thursday, largely on the strength of the Republican majority.

The measure, called the Small Business Tax Cut Act, passed 235 to 173.

Sponsored by House Majority Leader Eric Cantor (R-Va.), the bill would cut taxes for an estimated 22 million businesses by up to 20 percent, to a maximum of half their payroll. The entire cost of the one-year cut would be added to the debt.

Cantor and other Republicans argued that the bill would provide a powerful economic stimulus by letting businesses keep more of their own money so they can decide what to do with it, thereby encouraging them to hire. They said Democrats preferred to get in the way of businesses and let Washington decide how to spend the money.

"How do you empower small businesses? You let them keep more of the money they earn," Rep Adam Kinzinger (R-Ill.) said.

"I think the Democrats are waging a war on small business," Rep. Candice Miller (R-Mich.) said.

But Democrats countered that the measure was a giveaway for the rich that would do little for the economy, going mostly to people like Paris Hilton, Donald Trump and Larry Flynt, as well as lawyers and finance managers.

They pointed to data from Congress' nonpartisan Joint Committee on Taxation, which found the "effects of the bill on economic activity are so small as to be incalculable within the context of a model of the aggregate economy."

They also noted JCT data that found the greatest benefits go to wealthy firms, with 125,000 companies that earn more than $1 million a year getting 18 percent of the benefit. By contrast, the 9.2 million firms that earn under $100,000 a year would reap just 15 percent of the benefit. An analysis by the independent Tax Policy Center found an even bigger benefit for the wealthy.

The measure has almost no chance of becoming law because it is unlikely to advance in the Senate, and President Barack Obama has threatened to veto it.

But it did provide a sharp election-year contrast between the approaches of Democrats and Republicans to tax policy. Both sides tried to play up the contrast, especially after Republicans in the Senate blocked a bill on Monday that aimed to raise $47 billion by passing a Buffett Rule to ensure that multi-million-dollar earners pay at least a 30 percent tax rate.

"This week highlights the unfortunate double speak from our Republican colleagues when it comes to the deficit," Rep. Chris Van Hollen (D-Md.) said. "On the Senate side, a majority of Republicans voted against a bill to apply the Buffett Rule. Here in the House, we're providing [about] a $50 billion tax break that adds to the deficit and this one is targeted disproportionately to very wealthy individuals."

"This is a one-year thing that's going to give a great sugar high to the wealthiest individuals. Man, they are going to be floating on this," Van Hollen added.

He and others also noted the irony that on Wednesday Republicans were arguing for more billions in cuts to programs that help the poor and elderly on the grounds that the nation's debt was out of control.

"We were told only yesterday that because of a pressing national debt we can no longer fund hot meals for seniors though the Meals on Wheels program in Texas, that we could not afford to provide federal resources that are necessary there on child abuse or keeping a child with disability at home, or helping a senior maintain their independence, that there just aren't the resources to do that," Rep. Lloyd Doggett (D-Texas) said. "But today we are told there is $46 billion we can add to the debt."