GOP pushes business tax cut through divided House

WASHINGTON (AP) — Republicans pushed an election-year tax cut for nearly every employer in the country through the House on Thursday, ignoring a White House veto threat as they cast themselves as champions of small business and job creation. Democrats called the plan a budget-busting effort to funnel federal help to those who are already successful.

The $46 billion measure, approved on a mostly party-line 235-173 vote, lacked either suspense or any expectation that the plan would become law. The bill will die in the Democratic-controlled Senate, and for good measure, the White House warned of a veto by President Barack Obama, saying the proposal is far too broad and generous to the wealthy.

Its ultimate fate, though, was beside the point. With the economy and jobs the unrivaled top issues in this year's presidential and congressional campaigns, both parties were using the battle to underscore that they would make things better for voters while the other side would not.

"Congressional Democrats think we can tax our way to improve our economy," which will never work, said Rep. Pete Sessions, R-Texas. "Congressional Republicans, once again today, will stand with small business across the nation."

The measure, by House Majority Leader Eric Cantor, R-Va., would provide a one-year, 20 percent tax deduction for companies with fewer than 500 workers. That means firms could generally subtract 20 percent from their domestic incomes before calculating the federal taxes they owe.

Democrats complained that the bill would provide tax breaks whether companies hire additional employees or not, including to firms that fire workers. They said its beneficiaries would include hedge funds, lobbyists, lawyers and pornography businesses.

"What we have before us is the exact opposite of a jobs bill," said Rep. Alcee Hastings, D-Fla. "It's a boon for the rich, the very antithesis of smart tax reform, and it does nothing to create opportunities for middle class, let alone poor Americans."

The tax break would cost the government $46 billion in lost revenue — money that would add to deficits that are already huge. Catching Democrats' attention was an estimate by the nonpartisan Tax Policy Center, which studies tax legislation, that 49 percent of the bill's benefits would go to employers making more than $1 million annually.

Democrats also noted that Congress' nonpartisan Joint Committee on Taxation, which analyzes tax legislation for lawmakers, wrote recently that because the bill was tiny compared with the $15 trillion in annual U.S. economic activity, its impact on stimulating the economy would be "quite small."

Thursday's showdown was the second tax vote in Congress this week designed to transmit a political message. On Monday — a day before the Internal Revenue Service's deadline for tax returns — Republicans stopped a Democratic measure in the Senate that would have imposed Obama's "Buffett Rule" taxes on people earning at least $1 million a year.

House Republicans named their bill the "Small Business Tax Cut Act," though it would cover more than 99 percent of the country's employers, because that is how many had fewer than 500 workers in 2008, the most recent year for which Census Bureau figures are available. Cantor said he chose 500 as the cutoff because that is the definition for small business that the Small Business Administration uses.

Companies employing owners' relatives and workers who own small parts of the business would qualify for the reduction.

Obama has proposed a narrower way of prodding companies to add workers. His budget included creation of a 10 percent tax credit — an amount subtracted from a firm's tax liability — for smaller companies that add workers or increase salaries this year. That plan has an $18 billion price tag.

Cantor's office listed dozens of business trade groups and firms that were backing his measure, ranging from the Academy of General Dentistry to the World Golf Foundation.

"The short-term tax cut put forth in this bill is critical to franchise owners making decisions about hiring additional workers or expanding their businesses today," Judith Thorman, a vice president of the International Franchise Association, wrote Wednesday in a letter to lawmakers.

Missing from Cantor's tally was the National Federation of Independent Business, the country's highest-profile small business organization.

Asked for their view, federation spokeswoman Jennifer Cooper said in a written statement that the group "appreciates the continued focus from Congress to help small business with their tax burden."

Her statement made no direct mention of Cantor's bill, instead singling out for praise the reductions in individual income tax rates proposed in the House-approved GOP budget.