The House passed a pair of bills Thursday to provide tax breaks to businesses.
One bill, H.R. 4457, “America's Small Business Tax Relief Act of 2014,” would permanently extend Section 179 expensing of up to $500,000 after the generous bonus depreciation limit expired last year. It passed by a vote of 272 to 144.
The other bill, H.R. 4453, the “S Corporation Permanent Tax Relief Act of 2014,” makes permanent the shortening of the built-in gains tax-holding period for S corporations from 10 years to five years to give S corps quicker access to capital. It also contains a basis adjustment fix for charitable contributions made by S corporations. It was approved by a margin of 263 to 155.
House Ways and Means Committee chairman Dave Camp, R-Mich., applauded the passage of the two bills. “Another round of bipartisan votes sends a strong signal to the Senate that permanent tax policy is the right step for businesses to grow and to hire and help hardworking Americans see bigger paychecks,” he said in a statement Thursday. “It is time to be honest with the American people—these policies are not going away anytime soon —so let’s do what is right and give businesses and their workers the certainty they deserve. Washington needs to stop its constant tinkering with the tax code and provide permanent tax relief to help strengthen the economy.”
However, his Democratic counterpart on the committee, ranking member Sander Levin, D-Mich., pointed out that the cost of the permanent tax breaks had not been paid for or offset in either pieces of legislation and would add to the budget deficit. He also noted that President Obama has already indicated that he would veto the bills if they crossed his desk, and the Senate Finance Committee is taking a different approach with tax extenders legislation.
“The first two bills impacting S corporations regard the gain on the sale or distribution of appreciated assets and how charitable contributions of an S corporation are taken into account by shareholders,” Levin explained before the vote. “Over the years we have modified these provisions and extended them on a bipartisan basis. The Section 179 expensing provision which we will consider second has been in the Tax Code since 1958. It was expanded, and nearly quadrupled, to a maximum expensing allowance to $100,000 on a temporary basis in 2003. In 2008, as another recession took hold, that allowance was increased to $250,000. And in 2010, we again expanded the provision—this time to $500,000—as we continued action to spur the economic recovery. This level was in effect through 2013, and this bill before us would make these significant expansions permanent, unpaid-for.”
Levin complained that the bills would add up to $75 billion in deficit increases, on top of the cost of the permanent extension of the research and development tax credit that was approved by the House in May.
“When you add in the R&D credit that passed the House last month, and the eight other provisions that have moved through Ways and Means, it adds up to $614 billion, unpaid-for and permanent,” he said. “And there are still more than 40 tax provisions left unaccounted for.”
In contrast, he noted, Republican lawmakers in Congress are insisting that extending emergency unemployment benefits for an estimated 3 million long-term unemployed people who have lost their jobless benefits need to be paid for with spending cuts elsewhere in the budget
“The Republican majority insists that unemployment insurance be paid for, but when it comes to tax cuts, they can simply be added to the deficit,” said Levin.
Camp countered that Democratic lawmakers were also being hypocritical. “Sure, House Democrats, many who have sponsored this legislation before, are now demanding that we pay for an extension of these policies—despite voting year after year to extend these job-creating policies without being paid for,” he said. “Frankly, the millions of Americans searching for a job or a few extra dollars in their paycheck know that pro-growth policies like this pay for itself in the form of new investments, new jobs and higher wages. I think we all can agree that this is the right policy and we should set the rhetoric aside so we can have an America that works, with a strong, vibrant economy.”