New Small Business Tax Cut Bill Considered
The House of Representatives is considering the Small Business Tax Cut Act of 2012, sponsored by House Majority Leader Eric Cantor (R-Va.) on Thursday, April 19, 2012. It would reduce taxes on the adjusted gross income (AGI) of an estimated 22 million small businesses, defined as business with under 500 employees, by up to 20 percent next year. It could also add as much as $46 billion to the deficit.
While President Obama is likely to veto the bill, Cantor’s argument is that the tax break, which would be $6,500 on average, could be a potent stimulus for the economy, spurring growth by allowing entrepreneurs to spend and reinvest this money, leading to job creation. Cantor pointed to a study by tax analyst Gary Robbins that the fully implemented Small Business Tax Cut Act could create more than 100,000 new jobs.
Critics of the bill say that it could benefit already wealthy individuals and businesses like celebrities, sports franchises, and financial firms. According to the Joint Committee on Taxation, only about 15 percent of the tax break would benefit the 9.2 million small businesses with lower than $1 million a year in AGI. A disproportionate 64 percent would go to the top 11 percent of small businesses, and 18.3 percent of the tax break would help about 125,000 firms with an AGI of $1 million a year.
Because of this disparity, the White House called for a more targeted approach to simplify tax rates that would encourage new hiring.
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