Haven’t We Seen This Tax Cut Before?

Whenever politicians start throwing “small business” around, it’s best to sit up and pay attention. It’s also best to take what they say with a grain of salt.


Long time readers know that I’ve been saying since forever that small business policy that misses most of the small businesses in the country shouldn’t be called small business policy. I’m sure there’s something else we could call it that would be catchier or sexier, and would have the advantage of being accurate.

So, as we swing into election season, House Republicans have passed H.R. 9, enticingly entitled the Small Business Tax Cut Act, with much jumping and yelling. In some ways, this is a decisive response to the kinds of criticisms that have been coming from House minority leadership for months. House Majority Leader Nancy Pelosi (CA-D) and Democratic Whip Steny Hoyer (MD-D) have been very noisy in their complaints that the Republicans had been ignoring the economy and only cared about their well-heeled corporate friends.

Perhaps not in direct response to these accusation (at least, not anything anybody is inclined to acknowledge publicly) but in a suspiciously timely fashion, this tax cut has emerged from the moth balls in the House.  House Small Business Committee Chairman Sam Graves (R-MO), said in a statement when the House passed the measure:

“The Small Business Tax Deduction Act would provide tax relief for millions of small businesses, from mom and pop stores to small manufacturing and service companies, allowing them to invest and hire workers.  This is just the type of a jobs legislation that Washington should focus on, and I encourage the Senate to take up this bill.”

The Obama Administration’s Office of Management and Budget maintains that about half of the bill’s benefits would go to individuals with more than $1 million in annual income and to large corporations, because the legislation uses an excessively broad definition of a small business.

If you’re starting to feel a sense of deja vu, nobody can blame you. This is precisely the same debate that took place back in 2003, when President Bush’s second tax cut was being debated. He claimed cuts for the top tax bracket would benefit small businesses. A lot of other people said that was hogwash. Being blessed with a Republican Congress, Business got his tax cuts.

Nothing has changed since then. Nonemployers still comprise almost 80% of all small businesses and they still are only earning, on average, something like $45,000 per year. Most small businesses are microbusinesses are relatively low-earning outfits.

And, parenthetically, I wonder why these so-called small business tax cuts never confine the taxpayers that can use then to those that can prove themselves to actually be small businesses?

Now that it has passed the House, the bill has been referred to the Senate Finance Committee where, knowing Chairman Max Baucus (MT-D), there is likely to be some kind of action on the bill. Even so, it would be surprising if Senator Majority Leader Harry Reid were to let this bill see the light of day.

And provided the bill gets through all those potential roadblocks, President Obama is expected to veto it.

Everybody knew that when the House voted to pass this legislation along largely partisan lines. But the move will give endangered Republicans the ammunition to be able to tell the folks in their Districts that President Obama is anti-small business.

That was the real point of this exercise.

Question Photo via Shutterstock


Dawn R. Rivers Dawn R. Rivers, an award-winning small business journalist, regularly reports and analyzes small business policy and research as the publisher of the MicroEnterprise Journal. She also publishes research at the Microbusiness Research Institute and she blogs at The MicroEnterprise Journal Blog.

2 Reactions
  1. These tax cuts were not for the “Small Business”. I run a small business and will receive no benefits from this tax cut and there are no incentives to hire. I can’t remember every hearing that a small business was defined as having 500 employees.

    So again…this is another guise for the big guys with all the bucks. Where do you think the money from these tax cuts will go…in the executive pockets. That is What I expect.