Senate Republicans Block Small-Business Tax Breaks

The Senate wrangles over how best to offer incentives to small businesses.
Contributor, Amex OPEN Forum
July 13, 2012

The Senate broke the stride of the Obama administration's hoped-for march toward new tax breaks for small-business owners on July 12.

In what Democrats characterized as a partisan effort, the Senate, in a 53-to-44 vote, defeated a proposed 10-percent tax break in the Small Business Jobs and Tax Relief Act that would have encouraged new hires. The outcome of the final vote was largely attributed to a Republican-led filibuster. The bill needed 60 votes to survive the Senate.

A Political Football

Elliott Richardson, president and executive director of the nonprofit Small Business Advocacy Council (an association with 540 small-business members), says the vote is "emblematic of what goes on in Washington when it comes to small businesses."

"Primarily, we're used as a political football," he adds. "You get a shot at a 10-percent tax break, and it's just a shame that political folks on both sides of the aisle can't come together and do the right thing."

What Could Have Been

Had it passed, the Act stood to create as many as 1 million jobs, according to Regional Economic Models, a private group that studied the measure and issued its findings earlier this week. The Act might also have added an estimated $87 billion to the Gross Domestic Product, the group's report suggested.

Another tax break was defeated on July 12 as well, by a vote of 57 to 41. That bill would have let small businesses take greater deductions during 2012 on particular kinds of investments, such as new equipment.

Senate Majority Leader Harry Reid (D–Nev.) told Roll Call, which covers Capital Hill news, that he assessed the filibuster to have been motivated by a Republican desire to hinder President Obama, come the November election.

The Republican Version

The motive for the Republican action may be also rooted, however, in the Democrats' denial earlier in the week of their counterparts' wanted amendments to the Act. Some Republicans have said that the bill might have stood a better chance if, as they asserted was not the case, Republican members had been allowed make changes to it.

In another action related to small-business taxes, prior to July 12, the Senate dismissed by a 73-to-24 vote the Republican's own small-business tax-break bill after it had passed in the House last April. Democrats criticized the measure, proposed by Eric Cantor, the Republican House majority leader from Virginia, as being too greatly tilted toward the wealthy.

Under the terms of Cantor's Small Business Tax Cut Act, small-business owners could have cut taxes by 20 percent on up to half the amount of their payroll. But, according to Democrats, the bill didn't push as hard for new hires in the way that Obama's measure would have.

Obama's wanted Act specifically tied the 10-percent tax break to small businesses beefing up their payrolls—hiring or paying more money to existing employees.

James O'Brien is a correspondent for Boston University's Research Magazine and for The Commons a journal covering higher education. He has written extensively as a news correspondent for The Boston Globe. James blogs via Contently.com.

Contributor, Amex OPEN Forum