WASHINGTON — House Republicans responded to Senate Democrats’ attempt to pass a high-income tax increase on Thursday, passing a bill of their own that would provide a tax cut of up to 20 percent for small businesses employing fewer than 500 people.
Republicans say the tax cut would spur hiring and ease pressure on businesses that were hit hardest by, and are recovering slowest from, the economic downturn.
The final vote was 235-173; all Minnesotans voted with their party, except for Rep. Tim Walz, who was one of 18 Democrats to vote for the bill.
Minnesota Republican Erik Paulsen, who sits on the tax writing Ways and Means Committee, called the bill a solution to small business owners’ concerns.
“I’ve been listening to what small businesses have been asking for, I’ve been attentive to their needs, and they’re asking for help investing in their people and their employees and to invest in their companies and their operations,” Paulsen said at a Thursday press conference.
“This is where the vast majority of our jobs come from, the small business community. Out of every other economic recession we’ve had in the past, small business has led the way, and we’re not seeing small business lead the way in the manner that they have in the past.”
Republicans passed the legislation just days after Senate Democrats tried and failed to pass a much-hyped bill requiring millionaires to pay a tax rate of at least 30 percent. Republicans argued the tax increase would not only affect millionaires but also hurt small businesses that file tax returns as individuals.
The Senate, where Democrats are in the majority, is not likely to take up the House bill, called the Small Business Tax Cut Act. This time, Democrats flipped the Republican Buffett Rule argument on its head: they say the bill would provide tax breaks not only for small businesses but for high-income individuals as well.
The White House threatened a veto on Tuesday, saying the bill is “not focused on cutting taxes for small businesses, but instead would provide tax cuts to the most fortunate. … The proposal is a giveaway that will cost $46 billion and could, in fact, lead to delays and reductions in investment and hiring.”
The bill’s chances of becoming law before November’s elections are the same as the Buffett Rule’s — next to none. But Republicans acknowledged Thursday that it plays an important political role going forward.
“Certainly, if [Senate] Majority Leader Harry Reid can make time to tax the successful individuals and businesses in America, he can certainly find the time to provide a tax cut to the small businesses who drive our economy,” Texas Republican Kevin Brady said. “If the American public, as they head to the polls, want to know the key difference between the Republicans in Congress and Senate Democrats and the president, this makes it crystal clear.”
Devin Henry can be reached at email@example.com. Follow him on Twitter: @dhenry