Work on tax bill grinds to halt after quarrel over ‘illicit’ businesses

A House markup of a small-business tax cut measure temporarily ground to a halt after a GOP lawmaker suggested that a Democrat’s district might contain an array of morally questionable businesses.

Rep. Geoff Davis (R-Ky.) made the remark after Rep. Xavier Becerra (D-Calif.) questioned whether such businesses as abortion providers, sex traffickers and Kentucky native Larry Flynt’s enterprise would be eligible for the House Republicans’ proposed 20 percent small-business tax cut.

After Becerra pressed his point on several occasions, Davis apologized to Thomas Barthold, the chief of staff for the Joint Committee on Taxation, for the questions he had been receiving from Democrats.

“Perhaps the gentleman who alluded to every business that’s some type of immoral or illicit quality to it reflects the type of businesses in his congressional district,” Davis added at the House Ways and Means Committee markup.

The Kentucky Republican’s comments were met with a wave of objections from Democrats, and the Ways and Means markup broke for lunch shortly thereafter.

Before the break, Davis and Becerra also held an at-times-pointed discussion with Ways and Means Committee Chairman Dave Camp (R-Mich.), ranking member Sandy Levin (D-Mich.) and Rep. Richard Neal (D-Mass.).

When lawmakers returned, Davis attempted to clarify his comments, and the markup resumed.

“I want to be clear that my comments were not directed at a member and were only intended to ensure that small businesses receive the respect that they deserve,” said Davis, who has announced he will retire at the end of his current term. 

“I think that this is a point we can all agree on, and I thank the gentleman for his clarification,” Becerra responded.

The exchange was the most pointed of what quickly became a contentious back-and-forth over the proposed 20 percent tax cut, which is a priority of House Majority Leader Eric Cantor (R-Va.).

Democrats have criticized the proposal -– which would allow most businesses with fewer than 500 employees a tax deduction equal to 20 percent of their 2012 income -– as a giveaway to hedge funds, professional sports teams and other enterprises that don’t need tax relief.

Senate Democrats have proposed a dueling small-business tax cut, which would give a 10 percent cut to small businesses that hire new workers or give existing employees a raise. The measure would also allow businesses to completely write off large purchases made this year.

Camp said at the start of the markup that the 20 percent tax cut was not a substitute for tax reform, something most observers believe will have to wait for at least the next Congress.

“While we pursue comprehensive tax reform that gives businesses of all sizes the certainty they need to invest and hire for the future, we need something that can help small businesses today,” the Michigan Republican said.

But Democrats pointed out that the proposal is the sort of temporary tax provision that the House GOP budget, which is expected to get a floor vote this week, calls for ending. 

“I find a certain irony in terms of the disconnect,” said Rep. Earl Blumenauer (D-Ore.).

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