House GOP: Small business tax cut compatible with tax reform push

Republican lawmakers had also criticized the recent payroll tax cut extension because, among other reasons, it was a temporary measure, and also said Congress should concentrate on making tax changes that gave businesses more certainty.
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But Rep. Dave Camp (R-Mich.), the chairman of the tax-writing House Ways and Means Committee, suggested to reporters on Wednesday that the small business tax cut was very unlikely to be extended and that the measure would not inject any more ambiguity into the tax code for small businesses.

“This 20 percent deduction is something that’ll be immediate to them. It’s clear. It’s simple,” said Camp, who played a major role in crafting the tax reform framework in the House GOP budget. “And it’ll expire at the end of this year.”

Cantor has said he wants the House to pass the small business tax cut around the time Americans pay their taxes in mid-April, and Camp said Wednesday that he thought Ways and Means would mark up the proposal by the time the House leaves Washington next week.

Under the measure, millions of small businesses, as classified by one Small Business Administration definition, would be able to exclude 20 percent of their income from taxation.

Republicans have pushed similar proposals in recent years. But unlike those bills, the new legislation would not exempt certain industries like financial services and professional sports teams. 

The measure would cap the tax cut’s value at 50 percent of W-2 wages businesses pay to their employees, and thus would exclude dividends and other types of income.

Cantor also said Wednesday that the Joint Committee on Taxation has projected the proposal would cost $45.9 billion for one year, and that GOP lawmakers would not propose offsetting its costs elsewhere.

“We, in our budget, provide for trillions of dollars in mandatory savings to help resolve the budget deficit,” the majority leader said Wednesday. “We don’t feel it’s appropriate to burden small businesses, and that’s why we’re going forward with this bill.”

Democrats have said for weeks that the measure would help some, like hedge fund executives, that don’t really need a tax cut, and that they prefer more targeted measures to help small businesses.

Rep. Sandy Levin (D-Mich.), the ranking member at House Ways and Means, said Wednesday that he also found it problematic that Republicans didn’t want to pay for the proposal.

“I don’t think to give doctor’s offices, law offices, any kind of business operation a 20 percent deduction – I think there’s too much waste there, in terms of economic growth,” Levin said.