The White House threatened Tuesday to veto an effort by House Republicans to cut taxes for millions of smaller businesses, calling it an unproductive giveaway to many of the country’s most profitable companies.
The warning was issued two days before the GOP-run House is expected to approve the legislation, which Republicans say would kindle job creation. Even without President Barack Obama in the way, passage was expected to be little more than an election-year political statement because the measure is all but sure to die in the Democratic-led Senate.
The veto threat came on the last day for taxpayers to send their income tax returns to the Internal Revenue Service without requesting an extension.
That deadline has prompted both parties to use the week to push legislation telegraphing their tax priorities to voters focused on an economy that is not providing enough jobs. On Monday, Senate Republicans swatted down a Democratic “Buffett rule” bill backed by Obama that would impose a 30 percent tax on the incomes of the wealthiest Americans.
The House legislation, sponsored by House Majority Leader Eric Cantor, R-Va., would provide a 20 percent tax deduction to most businesses with fewer than 500 employees. That would cover 99.9 percent of U.S. companies, according to Census Bureau data for 2007, the most recent year available.
“We’re not saying that this is the panacea for everything,” Cantor told reporters, saying the GOP thinks the best answer would be a wide-scale overhaul of the tax code that would include lower rates. “But since the other side will not join us in an honest tax reform discussion, we believe that right now it is urgent that we help our job creators.”
In effect, Cantor’s legislation would let companies reduce the bottom-line income on their tax returns by 20 percent before determining their tax liability. The tax break would last for one year at a cost to the Treasury of $46 billion.
In a written statement, the White House said Obama’s top advisers would urge him to veto the bill if it reached his desk.
The bill “is not focused on cutting taxes for small businesses, but instead would provide tax cuts to the most fortunate. Under the bill’s definition of income, many of the `small businesses’ that would receive the largest breaks are law partners, consultants and other wealthy individuals and corporations with the largest profits.”
Nearly half, or 49 percent, of the tax breaks in the House measure would go to companies with income exceeding $1 million, according to an analysis by the nonpartisan Tax Policy Center, which analyzes tax legislation. Companies and people earning that much money account for just 503,000 of the roughly 165 million individual and corporate taxpayers in the country, or about one-third of one percent of them, according to statistics from the center.
Obama has proposed creating a 10 percent tax credit _ an amount that would be subtracted from a firm’s tax liability _ for companies that increase their payrolls this year. That measure has an $18 billion price tag.