Senate Democrats today unveiled proposals to give small businesses a 10 percent payroll tax credit for new hires added in 2012 and encourage the purchase of equipment.
Senate Majority Leader Harry Reid (D-Nev.) called them “two bipartisan measures that have been proven to help small business create jobs” on a conference call with reporters.
Under the bill, a 10 percent income tax credit would be provided on new payroll, through either hiring or increased wages, added in 2012. The provision would provide a maximum increase in eligible wages of $5 million per employer, and the amount of the credit is capped at $500,000.
The bill also extends “bonus depreciation” for one year. The provision allows businesses to write off the entire cost of major purchases in the year they are made rather than depreciate those expenses over many years.
By accelerating the recovery time of investment costs through bonus depreciation, additional first-year deductions for new investment would lower the after-tax costs of plants and equipment, which is designed to encourage new investment and promote economic recovery.
Reid drew a distinction between the Democrats’ bill and a proposal unveiled last week by House Majority Leader Eric Cantor (R-Va.). Cantor’s bill would give a 20 percent tax cut to businesses with fewer than 500 employees, a threshold Democrats argue is too broad.
Cantor said last week that his bill would “put more revenues, more money into the hands of small-business owners so that they can reinvest those funds to retain and create more jobs and to grow their business.”
But Reid disagreed.
“That is a key distinction in the way Democrats and Republicans approach this very important issue,” Reid said. “Our tax cut is targeted to help small businesses while Republican efforts are just camouflaged handouts to the wealthiest in America.”
Reid added that he hoped Republicans would support the measure.
Sen. Charles Schumer (D-N.Y.), who was also on the call, said the bill comprises two proposals from President Barack Obama’s Startup America initiative, which is designed to help small businesses.
He too raised concerns about the House proposal.
“The House Republican proposal is neither focused on true small business nor does it make the tax cut dependent on the company doing any hiring,” Schumer said. “The House proposal would give tax cuts to sports franchises, celebrity companies that don’t need the help and in some cases have billions of dollars in revenue.”
Vice President Joe Biden waits to conduct a mock swearing-in ceremony with Sen. Brian Schatz, D-Hawaii, in the Capitol's Old Senate Chamber, December 2, 2014. Schatz was sworn in to serve the remainder of his term since he was appointed to the seat after Sen. Daniel Inouye, D-Hawaii, passed away.