Legislation to provide tax credits for small businesses that hire new workers has made progress in the Senate, with lawmakers voting 80 to 14 to advance the bill past a procedural hurdle Tuesday, but Senate Democrats blocked an attempt Wednesday by Republicans to add an amendment that would extend the Bush tax cuts for another year.
The bill, known as the Small Business Jobs and Tax Relief Act, would provide a 10 percent tax credit of as much as $500,0000 to companies with annual payrolls of up to $5 million, for hiring new employees or raising wages.
The bill also would allow businesses to write off 100 percent of the business purchases they make this year, and expand the ability of businesses to claim an Alternative Minimum Tax credit in lieu of bonus depreciation.
“The extension of bonus depreciation would help small businesses that purchase equipment to deduct those purchases from their taxes more quickly,” said Senate Finance Committee chairman Max Baucus, D-Mont., in a floor statement Tuesday. “The proposal would also help the businesses that sell the equipment. Bonus depreciation sparks investment, increases cash flows, and creates jobs. And these measures work because they provide incentives. They require companies to do something beneficial in order to obtain the corresponding tax benefit—either to hire American workers or invest capital in the United States.”
However, on Wednesday, Sen. Orrin Hatch, R-Utah, the ranking Republican member of the Senate Finance Committee, criticized Senate Democrats for blocking his amendment, which would have extended the Bush tax cuts for another year for taxpayers at all income levels. President Obama has insisted that the current tax rates should only be extended for those making less than $250,000 a year (see Obama Urges Extension of Middle-Class Tax Cuts).
Hatch filed his amendment Tuesday. It would extend current tax policy through the end of 2013 and instructs the Senate Finance Committee to undertake comprehensive tax reform during that time. On Wednesday, according to Hatch, Senate Republicans offered to compromise and allow a vote in the Senate on the President’s small business tax plan in exchange for a vote on the Hatch amendment. The Senate Democratic leadership rejected the offer.
“Fair is fair,” said Hatch. “We have our proposal. We want to keep taxes low for all Americans, particularly with our economy on the ropes. And the President has his proposal. He wants to raise taxes on small businesses, even as the prospects for economic growth and job creation look increasingly bleak. So let’s have a vote. Let’s get on the record. Our constituents sent us here to make hard choices. It’s time to put our money where our mouths are.”
Republicans also tried to attach an amendment to the bill reflecting Obama's plan to only raise tax rates for those earning over $250.000 a year, but that effort was also blocked by Senate Democrats. Senate Majority Leader Harry Reid, D-Nev., said the President's plan would be introduced in a separate bill. The legislative language and details about the alternative minimum tax, the dividend tax, and the estate tax have not yet been spelled out on Obama's plan by Democrats. Reid and Senate Minority Leader Mitch McConnell, R-Ken., traded accusations Wednesday over allowing the two competing plans to move forward.
The Democrats' small business tax relief bill is expected to come up for a vote in the Senate on Thursday, along with a competing bill introduced by House Majority Leader Eric Cantor, R-Va., which has already passed in the House. Cantor's bill would provide a 20 percent tax cut for all small businesses, whether or not they hire more workers.
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