The Senate on July 10 approved a motion to take-up a $28.5-billion small business tax break measure that would provide a one-year extension of 100-percent bonus depreciation and a tax credit for new hires. Under Senate rules, the motion to begin debate on the Small Business Jobs and Tax Relief Bill (Sen 2237 ), required a 60-vote threshold, which was easily reached by an 80-to-14 margin.
Senate Republicans had initially deemed the legislation, introduced by Senate Majority Leader Harry Reid, D-Nev., “unconstitutional,” because the cost was not offset and the legislation did not originate in the House. The GOP, however, decided to take advantage of the tax debate as a means to highlight their views on tax cuts. Lawmakers are expected to debate the bill over the next few days.
Before the vote, Reid claimed that the two proposals in his legislation would create almost one-million new jobs. “Economists from across the political spectrum agree this is the most efficient way to give the economy a badly-needed boost,” said Reid. The White House on May 8 included the two provisions of Sen 2237 in its “to-do list” for Congress.
The tax credit for new hires provision would allow a qualifying employer to claim a tax credit if the employer increased its payroll expenses in 2012 compared to 2011. The tax credit would be equal to 10 percent of the increase in payroll expenses. Republicans argued that the tax credit is taxable, however, potentially reducing the 10-percent credit to as little as 6.5 percent after taxes and was unlikely to spur permanent new employment.
The House on April 19 approved a similar, but more expensive ($46 billion) measure, introduced by House Majority Leader Eric Cantor, R-Va. (TAXDAY, 2012/04/20, C.1 ). The Small Business Tax Cut Bill (HR 9 ) would allow a 20-percent tax deduction of active business income for any small business with fewer than 500 employees. This would apply to small businesses taxed through the individual tax code and C corporations that pay taxes through the corporate tax code.
By Jeff Carlson, CCH News Staff
Statement of Administration Policy on Sen 2237, the Small Business Jobs and Tax Relief Act
JCT Estimated Revenue Effects of the Small Business Jobs and Tax Relief Act, JCX-59-12