Congress returns to debate dueling tax reform proposals

Lawmakers will return to Washington next week to do battle over competing tax proposals that showcase the wide ideological gulf between Republicans and Democrats.

In the House, Republicans on Thursday are bringing to the floor a 20 percent tax cut for small businesses that Majority Leader Eric Cantor (R-Va.) has championed. Across the Capitol, Senate Democrats are planning a Monday vote on the so-called Buffett Rule, which sets a minimum tax rate for individuals with incomes of $2 million or more and phases that rate in for incomes between $1 million and $2 million.

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The proposals, which are timed to coincide with Tax Day, have little chance of making it into law with the 2012 campaign heating up, and they could hardly be more different in approach. The GOP plan would give $46 billion back to tax-paying businesses, while the Democratic measure would generate about $47 billion in new tax revenue over a decade if current tax rates stay the same.

For Republicans, the plan marks a return to offense on one of their bread-and-butter issues – tax cuts, which they argue will help stimulate job creation. Democrats had scored a rare pair of victories on tax cuts in December and February, when they wrangled concessions out of a defensive GOP on extending the payroll tax cut.

In coordinating with the White House on the Buffett Rule, Democrats in the Senate will force Republicans to vote on a plan that enjoys popular support and dovetails with President Obama’s bid to campaign against income inequality and tax breaks for the wealthy and corporations.

In a similar vein, Democrats in both chambers have attacked the GOP small business tax cut as a measure that will disproportionally benefit millionaires. They cite an analysis by the Urban Institute’s Tax Policy Center finding that 49 percent of the $46 billion tax cut would go to people with annual incomes of $1 million or more. Democrats have also lampooned the proposal because, unlike a similar bill introduced in 2010, it does not exempt businesses who wouldn’t use the tax break to hire additional staff — like professional sports teams or celebrities like Oprah Winfrey.

 “It’s sort of the ‘give the 1 percent a break’ tax act,” the vice chairman of the House Democratic caucus, Rep. Xavier Becerra (Calif.), said in an interview. “It’s not anything that helps small businesses when half of the money goes to millionaires.”

Becerra criticized the lack of a requirement that businesses actually hire new workers to be eligible for the tax break, which he said could easily go to people like Paris Hilton and Larry Flynt.

Republicans counter that they are simply using the Small Business Administration definition of a small business to determine who qualifies.

“This is a simple, straightforward proposal that uses a common definition for what is a small business,” the chairman of the House Small Business Committee, Rep. Sam Graves (R-Mo.), said in an email. “Washington shouldn’t pick winners and losers, and to try to carve out every business and industry that the bill’s opponents have a beef with is the type of thinking that has made it so hard for American small businesses to comply with the nearly 70,000 pages of tax code.”

Unlike other debates over taxes and spending in the last year, both parties believe they have the upper hand in the dueling tax proposals. Republican aides say the small business bill polls “off the charts,” and they argue Democrats are making a mistake pushing a tax increase so aggressively in a campaign season.

“House Democrats are taking an unprecedented and ill-advised political move to run on a platform of higher taxes and bigger government in the middle of an election year,” said Paul Lindsay, spokesman for the National Republican Congressional Committee. “This is a simple contrast of Republicans who want small businesses to grow and Democrats who want government to grow.”

While the Buffett Rule may address tax fairness, it is not a jobs bill, and the $47 billion it is projected to generate in revenue won’t come close to closing the deficit, Republicans argue.

“It is simply an election year campaign tactic to divide Americans,” Graves said. “It won’t fix our debt crisis, it won’t address rising gas prices, and it won’t create jobs.”

Democrats say the contrast works in their favor, as they seek to rebrand the GOP proposal as a giveaway to the wealthy as opposed to mom-and-pop businesses.

“Every election is about who you’re for, and every time Republicans remind the American people they’re for millionaires and billionaires instead of the middle class, we win,” Rep. Steve Israel (N.Y.), chairman of the Democratic Congressional Campaign Committee, said in an interview.