WASHINGTON -- In the second major shot in Washington's ideological battle over taxes this week, the White House on Tuesday slammed a small-business tax-cut proposal in the House as a handout for the "fortunate" and threatened to veto it.
The Small Business Tax Cut Act of 2012, sponsored by House Majority Leader Eric Cantor (R-Va.), would slash taxes on the adjusted gross income of as many as 22 million small businesses -- those with fewer than 500 employees -- by as much as 20 percent for one year. It would add $46 billion to the deficit.
The House is set to consider the bill on Thursday. On Monday, Senate Republicans blocked the Buffett Rule, a measure from the ideological opposite end of the spectrum, which aimed to ensure that multimillionaires and billionaires paid at least a 30 percent tax rate.
Cantor argues that the average $6,500 tax break resulting from his measure would serve as a potent economic stimulus, which could spur growth by letting entrepreneurs keep more of their money to spend and reinvest as they saw fit.
The Small Business Tax Cut Act of 2012, sponsored by House Majority Leader Eric Cantor (R-Va.), would slash taxes on the adjusted gross income of as many as 22 million small businesses -- those with fewer than 500 employees -- by as much as 20 percent for one year. It would add $46 billion to the deficit.
The House is set to consider the bill on Thursday. On Monday, Senate Republicans blocked the Buffett Rule, a measure from the ideological opposite end of the spectrum, which aimed to ensure that multimillionaires and billionaires paid at least a 30 percent tax rate.
Cantor argues that the average $6,500 tax break resulting from his measure would serve as a potent economic stimulus, which could spur growth by letting entrepreneurs keep more of their money to spend and reinvest as they saw fit.
"This is a bill which will directly help small businesses create jobs," Cantor told reporters on Tuesday. "And as the Senate voted last night and the Democrats brought up their priority, which was to raise taxes, we believe you ought to reduce taxes on small businesses to create jobs. And in fact, there's a study out, which shows that this bill, when fully implemented, will create an additional 100,000-plus new jobs."
Cantor was referring to a study by conservative tax analyst Gary Robbins, who heads the firm Fiscal Associates.
But critics have argued that the benefits would disproportionately land in the pockets of wealthy individuals and businesses such as sports franchises, financial firms and celebrities. Congress' revenue estimators, the Joint Committee on Taxation, has calculated that the top 11 percent of small businesses would grab 64 percent of the break, while the 125,000 firms with $1 million a year in adjusted gross income would snag 18.3 percent. The 9.2 million small businesses at the bottom of the income heap would share about 15 percent of the break.
The bill "is not focused on cutting taxes for small businesses, but instead would provide tax cuts to the most fortunate," the Obama administration noted in a statement. "Under the bill’s definition of income, many of the 'small businesses' that would receive the largest tax breaks are law partners, consultants, and other wealthy individuals and corporations with the biggest profits. The proposal is a giveaway that will cost $46 billion and could, in fact, lead to delays and reductions in investment and hiring."
Rep. Xavier Becerra (D-Calif.), who also opposes the bill, recently told The Huffington Post that this proposal could lead to reductions in investment. That's because any capital investment that a business counts for a tax break lowers its adjusted gross income. If a business takes that deduction this year, this would lower the income on its books eligible for the 20 percent break. So, he argued, businesses might put off capital investments.
"You're thinking, wait a minute, I want to get 20 percent off as much as I can now. Why don't I hold off that investment until next year, " Becerra said. "The reality is this is almost a wait-till-next-year tax break, which essentially makes a lot of businesses hold off making investments today that could lead to jobs tomorrow."
The White House argued that a more "targeted" approach that simplifies tax rates and encourages new hiring would be better. "If the President is presented with H.R. 9, his senior advisors would recommend that he veto the bill," the administration's statement concluded.
Cantor was referring to a study by conservative tax analyst Gary Robbins, who heads the firm Fiscal Associates.
But critics have argued that the benefits would disproportionately land in the pockets of wealthy individuals and businesses such as sports franchises, financial firms and celebrities. Congress' revenue estimators, the Joint Committee on Taxation, has calculated that the top 11 percent of small businesses would grab 64 percent of the break, while the 125,000 firms with $1 million a year in adjusted gross income would snag 18.3 percent. The 9.2 million small businesses at the bottom of the income heap would share about 15 percent of the break.
The bill "is not focused on cutting taxes for small businesses, but instead would provide tax cuts to the most fortunate," the Obama administration noted in a statement. "Under the bill’s definition of income, many of the 'small businesses' that would receive the largest tax breaks are law partners, consultants, and other wealthy individuals and corporations with the biggest profits. The proposal is a giveaway that will cost $46 billion and could, in fact, lead to delays and reductions in investment and hiring."
Rep. Xavier Becerra (D-Calif.), who also opposes the bill, recently told The Huffington Post that this proposal could lead to reductions in investment. That's because any capital investment that a business counts for a tax break lowers its adjusted gross income. If a business takes that deduction this year, this would lower the income on its books eligible for the 20 percent break. So, he argued, businesses might put off capital investments.
"You're thinking, wait a minute, I want to get 20 percent off as much as I can now. Why don't I hold off that investment until next year, " Becerra said. "The reality is this is almost a wait-till-next-year tax break, which essentially makes a lot of businesses hold off making investments today that could lead to jobs tomorrow."
The White House argued that a more "targeted" approach that simplifies tax rates and encourages new hiring would be better. "If the President is presented with H.R. 9, his senior advisors would recommend that he veto the bill," the administration's statement concluded.
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