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House OKs tax cut for small businesses; Senate is certain to defeat measure

The Republican Party's response to the "Buffett Rule" -- a massive one-year tax break for small businesses -- passed the House Thursday on a near-party-line vote before heading toward a quick and certain death in the Senate.

Three days after Senate Republicans killed the Buffett Rule tax increase on millionaires and billionaires, the House GOP leadership offered its political response: a $46 billion measure that would give every business with fewer than 500 employees a one-year, 20 percent tax deduction.

The measure passed the House in a 235-173 vote.

Republicans argued that the bill would jump-start hiring by all sorts of small businesses, and Rep. Kathleen C. Hochul of Amherst -- one of only 18 Democrats who backed the bill -- agreed.

"This is exactly the platform I ran on," Hochul said. "We have to do everything we can to help our small businesses, and by giving them a tax break they will have the resources to expand inventory, but also they will be able to hire more employees."

But the bill now faces a Democratic brick wall. Democratic leaders in the Senate have vowed to kill the measure and the Obama administration has vowed to veto it if it somehow managed to pass. They derided the measure as a giveaway to businesses that in many cases don't need the help.

"The problem with the Republican bill, in my opinion, is that it doesn't require that you get the [tax break] money for hiring," said Sen. Charles E. Schumer, D-N.Y. "It is for businesses of under 500 employees but you could be the owner of a hedge fund and make millions of dollars a year and you get a 20 percent tax break even if you didn't hire anybody."

Schumer backs a competing proposal that would allow businesses to write off the entire value of major investments this year, while giving businesses a tax credit equal to 10 percent of the salary of each new employee hired.

Much like the Buffett Rule, the GOP small-business tax cut was doomed from the outset but designed not so much to become law, but to send a message.

Just as Democrats pushed the Buffett Rule to show that they favor higher taxes on the wealthy, Republicans pushed the small-business tax cut to show that they're on the side of the nation's job creators.

"One of the primary reasons this is so important is to put a spotlight on the fact that the economic engine of America is going to be small-business America," said Rep. Tom Reed, R-Corning. "We should be taking actions in Washington that allow the small businesses of America to be put in a position to compete and have resources and capital to put people back to work."

But Rep. Brian Higgins, D-Buffalo, and most other Democrats opposed the GOP tax bill, saying it would not have its intended effect of creating jobs. Democrats cited a report from the nonpartisan Joint Committee on Taxation that the $46 billion bill's impact would be "quite small" in the $15 trillion U.S. economy.

"It disproportionately goes to the very wealthy, and it doesn't even require companies to create jobs," Higgins said. "It's a tax break that could even go to companies that off-shore jobs. It is nothing but a giveaway to a cherished Republican constituency."