Small Biz Tax Cuts: Moot, Except as Political Fodder


No one expects Rep. Eric Cantor’s proposed 20 percent tax cut for small business owners to get any farther than the House. But that's not the point. This is a purely a "he-said, she-said" moment where Republicans and Democrats take every opportunity to point out how the other side doesn't support small business.

The legislation did pass the House on Thursday, 235-173. The voting was split, as expected, pretty much down the party line.

The debate continued on CNBC’s Kudlow Report, with Rep. Chris Van Hollen (D-Md.), and Sen. Kay Bailey Hutchison (R-Texas).

The debate was along party lines, as well, with Van Hollen saying it would benefit wealthier business owners, and Hutchison asserting that tax breaks are necessary and that the Obama administration is over-regulating businesses.

“What this does is provide a windfall tax break to big hedge-fund owners, the wealthiest Americans, and they don't even have to create one single job in order to receive a tax break, which is why the nonpartisan committee says the impact is so small, so minuscule as to be incalculable,” Van Hollen told show host Larry Kudlow.

While Kudlow quoted The Wall Street Journal as saying the legislation is “a bit gimmicky,” and noted that the tax cuts are for just one year, Hutchison countered that while everyone would like to see “real tax reform,” anything Congress can do to help small business owners is worthwhile.

“With the Obama health care [plan] staring them in the face … what Eric Cantor is trying to do is to say to the small business people, ‘We do want you to hire people, we're going to give you a break, and your payroll and I think it will help for the economy.’”

Van Hollen said a 20 percent tax cut “is worse than a gimmick, because it's going to add $50 billion to our national debt, put on our credit card, which as all of us know means someone else is going to have to pay for it down the road.”

Unswayed, Hutchison said if the vote makes it to the Senate, she will vote yes. “I think this is a way to say, you know what? If you will increase your payroll, if you will just keep people on the job, you're going to get a 20 percent tax break.”

What goes unsaid in most conversations about this legislation is that, while it is aimed at businesses with fewer than 500 employees, the majority of those businesses — 20 million, according to Small Business Administration data — employ just one person. And the tax cut wouldn’t apply to companies without employees.

Another reason why, perhaps, while this debate is somewhat interesting in theory, it has almost no application in real life. Except as an opportunity for politicians to make it look like the other side doesn't want to help small businesses.

Email us at SmallBiz@cnbc.com
Follow us on Twitter @SmallBizCNBC