In a display of election-year bravado, the House approved a short-term $46 billion tax cut on Thursday that would affect virtually every business in America but faces near-certain rejection by Senate Democrats.
The bipartisanship that surfaced when Congress passed a jobs act last month was nowhere to be found as lawmakers passed the one-year measure on a rancorous 235-173 vote, with 18 Democrats crossing the aisle to support it. The measure would apply to business employing fewer than 500 workers and allow taxpayers to subtract 20 percent from their income before calculating the taxes they owe.
While Republicans called it a break for small businesses, but Democrats argued the cut would apply to the vast majority of businesses in the U.S. and wealthy Americans could reap a large sum of the rewards. The White House threatened a veto of the measure earlier this week.
But as both parties gird up for the November elections, the tax cut gave Republicans an opening to complain that Democrats have hampered their efforts to reform the tax code, while contrasting their record as job creators with President Obama.
“What we want to do is a permanent, broader tax reform but since we can’t see eye to eye on that, let’s give the small businesses some help now,” said House Majority Leader Eric Cantor, the Virginia Republican who sponsored the measure.
Meanwhile, Democrats pointed to recent studies that they said back up their arguments that the bill wouldn’t do much for the economy and would help out rich lawyers, lobbyists and consultants.
The legislation would have only a negligible affect in stimulating economic growth, according to a nonpartisan analysis by the Joint Committee on Taxation, and an independent study found that half the tax savings would go to Americans making more than $1 million each year.
“In a cruel hoax and twist on this legislation, wealthy individuals can qualify for this even if they fire people this year,” said Rep. Chris Van Hollen, Maryland Democrat. “It gives a big tax break to the wealthiest individuals while adding $50 billion to our deficit and debt.”
Republicans defeated an amendment offered by Rep. Sander Levin, Michigan Democrat, that would replace the income deduction with a deduction for spending on capital investments. Mr. Levin said his amendment presented a stark contrast to Republicans’ “untargeted giveaway” by directing tax benefits to companies that invest long-term.
“It will flow to manufacturers who make significant investments in property and other equipment,” Mr. Levin said. “Those are the ones who create jobs.”
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