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 bill to boost start-up companies 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 Republican plan would impose taxes on just 80 percent of a business's income if it employs fewer than 500 workers. Republicans said it was a first step while they push for broader tax reforms.
"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.
Democrats argued the benefits of the tax cut would go mostly to wealthy Americans, and the White House threatened a veto of the measure earlier this week.
The legislation would have a wide impact because 99 percent of businesses in American employ 500 workers or fewer, according to the most recent Census Bureau data.
Republicans did not offset the $46 billion in federal revenue that would be lost, leaving Democrats an opening to call the bill fiscally irresponsible.
"I say to anybody who votes for this bill and then goes home and utters the word 'federal deficit,' they will sell short the intelligence of their constituents because they'll know when someone is selling them a pig in a poke," said Rep. Sander M. Levin, Michigan Democrat.
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."
Senate Democrats said Thursday they're working on their own version that would specifically target tax relief to businesses that are making capital investments or hiring new workers.
Senate Majority Leader Harry Reid, Nevada Democrat, said that would ensure help is going to businesses producing jobs, not just to wealthy business owners.
"All efforts to help small businesses are not equal," he said.
During its debate the House defeated an amendment Mr. Levin offered to the measure that would base the deduction on capital investments instead of income. 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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