- Associated Press - Thursday, July 12, 2012

The Senate on Thursday rejected rival Democratic and Republican plans for cutting taxes on businesses, with both parties refusing to yield ground in their election-year struggle over how best to spark the economy.

Each side said the other’s bill would not do enough to make a difference for struggling families and businesses looking for help. Underscoring the sharp partisan elbows being thrown as this November’s presidential and congressional elections draw near, they swapped charges that the other party was letting political goals trump real efforts to revive a job market that everyone agrees has been sputtering for too long.

“We’re in the midst of another Senate floor show, pursuing legislation that will get the president and his allies campaign talking points but will do absolutely nothing to spur economic growth and job creation,” said Sen. Orrin G. Hatch, Utah Republican.

“There’s no reason for them to oppose this bill, other than they’re trying to hurt President Obama, small businesses and the middle class,” said Senate Majority Leader Harry Reid, Nevada Democrat.

Thursday’s showdown was a precursor to a much bigger battle already under way over renewing reductions in income tax rates, dividends and other levies on most taxpayers that will otherwise expire in January. President Obama and Democratic leaders want to let tax rates rise for households earning more than $250,000, while Republicans want everyone included when tax cuts are extended, a clash that pits Democrats’ tax fairness arguments against GOP claims that higher taxes on the rich thwart job creation.

The Democratic bill cutting business taxes was derailed 53-44, with Democrats falling seven votes short of the 60 they needed to overcome GOP procedural barriers. Sen. Joe Manchin III of West Virginia was the only Democrat to oppose the measure, while Sens. Scott P. Brown of Massachusetts and Dean Heller of Nevada were the only Republicans to favor it. All three face tight re-election races this fall.

Minutes earlier, the GOP version was turned aside 73-24.

In an embarrassment to the Republican bill’s original author in the House, House Majority Leader Eric Cantor, Virginia Republican, 21 Republican senators - nearly half - voted against it. Several Republicans said they were unhappy that the $46 billion measure was not paid for - meaning it would boost budget deficits - and that it complicated the tax code at a time when many lawmakers want to simplify it by erasing some tax breaks.

The Democratic bill would give tax credits of up to $500,000 this year to companies that enlarge their payrolls over 2011 levels. It would also let firms deduct the entire cost of some major equipment purchases this year under the tax code’s “bonus depreciation” rules, doubling the current 50 percent deduction available.

Democrats said the measure would create 990,000 jobs, citing a study they requested from a private consulting firm. The White House said 2 million companies that hire new workers or give raises would benefit.

Republicans said it wouldn’t go far enough, and have called for more dramatic legislation preventing income tax rates from rising in January on all earners and avoiding a steep increase in taxes on estates and businesses that family members inherit.

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