Cantor's small-business tax cut passes House in 235-173 vote
By Pete Kasperowicz and Bernie Becker - 04/19/12 01:56 PM ET

The House approved legislation backed by Majority Leader Eric Cantor (R-Va.) Thursday that would cut taxes on small business by 20 percent.

For the second day in a row, the House ignored a veto threat from President Obama in passing the tax bill in a 235-173, mostly party-line vote. On Wednesday, the House approved transportation legislation that also mandated approval of a controversial oil pipeline.

In Thursday's vote, Republicans overcame Democratic objections that the tax cuts are not paid for and would add $46 billion to the budget deficit in just one year. The bill won the support of 18 Democrats, while 10 Republicans voted against it.

Republicans voting against the tax cut were Reps. Justin Amash (Mich.), Paul Broun (Ga.), Jeff Fortenberry (Neb.), Raul Labrador (Idaho), Steve LaTourette (Ohio), Cynthia Lummis (Wyo.), Tom McClintock (Calif.), Mick Mulvaney (S.C.), Reid Ribble (Wis.), and Rob Woodall (Ga.).

The vote was the culmination of a tax battle that both parties waged in the same week that millions of Americans filed their personal income tax returns. But while House Republicans passed their tax proposal, Senate Democrats failed to get enough votes to proceed on their plan to require a minimum tax on high-income earners, a version of the so-called "Buffet Rule."

Though House Republicans were able to push their bill through, neither that bill nor the Buffet Rule bill are expected to become law, essentially making both measures talking points for the fall election.

Republicans said their vision of tax reform — rather than the tax hike Democrats proposed on the rich — was closer to what voters want to see. Under the bill, companies with less than 500 employees could get a 20 percent tax break, but only for a year. Cantor said that while this is not a perfect solution, it's as close as Congress can get given the divide over taxes.

"The essence of supply side economics, the centrality issue on taxes is the reduction of marginal rates," Cantor said during floor debate. "That's exactly what this does. Does it provide it for long enough? Does it provide permanency? No.

"What we want to do in a permanent way is effect broader tax reform. But since we can't see eye-to-eye on that, since we've still got work to do, let's give the small businesses some help now."

Democrats responded by reiterating many of the points the White House raised in its Tuesday veto threat, including that it is not paid for.

"This is a fiscally totally irresponsible piece of legislation, and you know it and I know you know it, and America ought to know you know it," said House Minority Whip Steny Hoyer (D-Md.). "What this bill does is blow a $46 billion hole in the deficit this year alone."

Democrats also noted that Republicans themselves are anticipating that the bill would create 39,000 jobs, which House Ways and Means Committee ranking member Sandy Levin (D-Mich.) said amounts to $1.1 million in new debt per job.

"This bill needs to be graded, and the grade it gets is F," Levin added. "A fat F grade. It fails all tests of sound tax policy."

Still others argued that the bill would give the same break to all companies with 500 or fewer employees, regardless of how well they're doing. Rep. Xavier Becerra (D-Calif.), the vice chairman of the Democratic caucus, charged that this break would also be enjoyed by wealthy celebrities who run small, successful companies.

Instead, Becerra and other Democrats argued in favor of a Democratic substitute that would extend a tax break for companies that make capital improvements.

"If Paris Hilton wishes to invest in plants and machinery, then perhaps she'll qualify," Becerra said. "If Larry Flynt would want to invest in plants and machinery for his business, perhaps he'd qualify. But otherwise, this is a giveaway. Ours requires you make investments in America."

Despite that argument, the Democratic proposal failed in a 175-236 vote.

Democrats have vowed to bring the Buffett Rule bill up again, showing they are not afraid to debate tax fairness and economic equality even though taxes are usually Republicans' bread-and-butter issue.

Democratic party leaders have continually cited polls this week showing that voters support the Buffett Rule, and have argued that the 13.9 percent tax rate that Mitt Romney, the presumptive GOP nominee for president, paid in 2010 merely underscores the need for the legislation.

But House Republicans said Thursday they believe voters will respond to their more positive message on taxes, and that this week's two votes give voters a stark illustration of where the two parties stand.

"We want to grow more successful small businesses and the jobs along Main Street," said Rep. Kevin Brady (R-Texas), a senior member of the tax-writing Ways and Means Committee. "Democrats want to punish those who invest and work hard and succeed over the years."

With Senate Democrats planning on more work on the Buffett Rule, the House is also expected to take more pre-election tax votes of their own, possibly including an extension of the Bush-era tax rates.

"The House is going to do everything we can make sure taxes don't go up on anybody," Cantor said Thursday.



Cantor's small-business tax cut passes House in 235-173 vote - The Hill's Floor Action