By Alexander Bolton - 03/26/12 06:06 PM EDT
Senate Democrats on Monday introduced a $25 billion tax cut to spur hiring among small businesses that is intended to counter a different offer by House Republicans.
The two-pronged proposal will give small businesses a 10 percent tax cut in exchange for hiring new workers or raising employee pay, and will allow businesses to fully deduct the cost of significant investments made this year.
“That is a key distinction between the way Democrats and Republicans approach this very important issue. Our tax cut is targeted to help small businesses while Republican efforts are just camouflaged handouts to the wealthiest in America,” Reid added.
Democratic leaders plan to bring the legislation to the floor after the April recess.
They criticized a one-year plan unveiled earlier this month by House Majority Leader Eric Cantor (R-Va.) that would cut taxes for businesses with less than 500 employees by 20 percent. It would cost just under $50 billion.
“The House Republican proposal is neither focused on true small business nor does it make the tax cut dependent on the company doing any hiring. The House proposal would give tax cuts to sports franchises, celebrity companies that don’t need the help and in some cases have billions of dollars of revenue,” said Sen. Charles Schumer (D-N.Y.).
A senior Democratic aide noted the House Republican tax proposal would give tax cuts to many hedge funds, which tend to have fewer than 500 employees.
Schumer predicted the Democratic small-business tax plan would pass the Senate in the next several weeks and said it “would be unfathomable to imagine” that Senate Republicans would try to “block a tax cut aimed at business.”
Schumer said any small-business tax proposal must “be targeted and should be tied to an increase in overall payroll” if it has a chance to pass Congress.
The tax credit to businesses that increase payroll would cost $16 billion to $17 billion. It is similar to the Hatch-Schumer Hire Act that passed the Senate with bipartisan support two years ago.
The tax credit would amount to 10 percent of payroll costs, giving employers tax relief if they raise workers’ pay. It would be capped at $500,000 per employer.
The bonus depreciation plan would cost about $8 billion. It is an extension of policy that was in effect last year. Republicans had sought to add bonus depreciation to the extension of the payroll tax holiday.