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Tax Battle Brewing Over Small Businesses

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.

House Republicans have already passed a 20 percent tax cut for businesses with fewer than 500 employees, which the White House has threatened to veto because much of the benefits would go to millionaires regardless of whether they hire anyone or expand their business. Democrats have argued that the GOP proposal could actually encourage business owners to put off expenses to take advantage of the temporary tax cut, depressing demand.

But House Majority Leader Eric Cantor (R-Va.) has defended the House’s approach as one that will free up small businesses to expand, and he has rejected efforts to limit or target the tax break.

House Republican leadership aides note that the Senate has not yet passed a small-business tax cut, so talk of taking up the president’s idea or holding a conference is premature.

And House GOP leadership has criticized Obama’s plan, with Cantor earlier this month saying the president “wants to direct small businesses and how they commit their capital,” while “we believe that we ought to let the investors decide on how best to allocate their capital.”

The Virginia Republican was in his Congressional district Tuesday and appeared on Fox Business with a local small-business owner to promote H.R. 9, the 20 percent tax cut for small businesses.

“What it takes is lessening the burden from Washington and reducing taxes, which is why I have talked about a small-business tax cut,” Cantor said on the program.

Other Republicans compare the president’s plan to the Hiring Incentives to Restore Employment Act, which offered a payroll tax exemption and a business tax cut of up to $1,000 for new hires in 2010. But Republicans say it did not work.

“This item was crossed off the Democrats’ ‘to-do list’ in 2010,” said Michael Steel, spokesman for Speaker John Boehner (R-Ohio).

So if the president invokes the bully pulpit and encourages House lawmakers to pass his plan, he is likely to hear the retort that they already passed their own.

“I can see us trying to address and work in the same direction that he’s talking about, but I don’t see us necessarily taking up their legislation verbatim,” a House GOP leadership aide said. “At this point, it would be great if we could alleviate some of the pressure that small businesses feel, but I think our response to that is, ‘That’s why we encourage the Senate to take up H.R. 9.’”

The White House promises to keep pushing. Obama on Wednesday reiterated the call for his full to-do list, including provisions for mortgage refinancing, a Veterans Jobs Corps, ending tax breaks for companies that ship jobs overseas and instead giving them to companies that bring jobs back, and extending renewable energy tax breaks.

As he signed the Export-Import Bank bill, Obama said that his administration would continue to do what it could on its own to help the economy but that “it gets a whole lot easier if we get some help from Congress.”

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