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Tax Battle Brewing Over Small Businesses

Democrats Hope to Put Republicans on Defense

Saul Loeb/AFP/Pool
Democrats hope that President Barack Obama's tax cut for small businesses will find its way through the House in the next few weeks and put Republicans on defense.

President Barack Obama’s to-do list might be stalled in Congress, but Senate Democratic leaders are hopeful at least one of the five items — a tax cut for small businesses — will find its way through the chamber in the next few weeks and put Republicans on defense.

The business tax cut bill pairs a 10 percent tax credit for new hires and increased salaries — up to $500,000 per business — with extending 100 percent expensing provisions on equipment purchases, which has been a priority for the business community and has previously been supported by the GOP.

And Democrats, as of now, plan to adopt the House Republican strategy of simply adding to the deficit rather than offering their typical fare of paying for tax cuts with a tax increase on the wealthy or on corporations. With no “poison pills,” the bill is just the kind of sugarplum that could be hard to oppose.

“It’s hard to see how Republicans could possibly defend blocking a tax cut for businesses,” a Senate Democratic leadership aide said. “Barring something unforeseen, it seems like within the next few weeks, President Obama could be batting a thousand in the Senate on his to-do list.”

Senate Republicans said they are happy to have a debate on taxes — although it’s not clear yet whether they will sign on to the bill.

Sen. Chuck Grassley (R-Iowa) stopped short of endorsing the bill last week in a brief interview but said that the expensing provisions would help the economy. He added that not paying for them would follow the GOP principle that extending tax relief should not have to be offset. Republicans, however, are generally more skeptical of targeted tax breaks such as the one for hiring workers, Grassley said.

Still, the twin olive branches of tax relief for businesses and not attaching it to a millionaire tax, the Buffett Rule or some other tax increase could help smooth the path for the bill.

Republican aides remained skeptical and said GOP Senators would want the opportunity to offer amendments and are pushing their own proposals, such as repealing the medical device tax in the health care law.

Republicans note that they already sent a letter to Senate Majority Leader Harry Reid (D-Nev.) urging him to avoid “the largest tax hike in history” by extending Bush-era tax cuts that expire at the end of this year.

“We can look at this small piece of legislation that you say is really important, but why don’t we be a good, responsible Congress and start having this debate now? ... The problem is what everyone is worried about is heading into December,” a second senior Senate GOP aide said.

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