House Republicans propose 20% tax cut for small businesses

U.S. House Republicans proposed a one-year, 20% tax cut for businesses with fewer than 500 employees, following through on a 2010 campaign pledge. “We should all be able to rally around the cause of small businesses,” House Majority Leader Eric Cantor of Virginia, sponsor of the plan, said at a news conference today in Washington. The tax cut would cost $45.9 billion, he said. Unlike earlier proposals by House Republicans, the bill wouldn't prevent any specific industry from qualifying for the break amounting to 20% of businesses' income, according to text of the measure obtained by Bloomberg News. Income from the sale of capital assets wouldn't qualify, nor would income from dividends, interest, royalties and annuities. Cantor's office didn't immediately release a bill text. The measure would limit the value of the deduction to 50% of wages paid by companies to employees who aren't owners. Republicans are promoting the legislation as an aid to small businesses, even as they plan an overhaul of the tax code that would remove many tax breaks. “As we pursue long-term tax reform, we need something immediate,” House Ways and Means Committee Chairman Dave Camp of Michigan said at the news conference. He said he plans for his committee to vote on the measure by the end of next week. Earlier Proposals Cantor and other House Republican leaders proposed a similar small-business tax deduction in 2009 and 2010. The measure didn't advance in the House, controlled at the time by Democrats. Republicans then rolled the plan into the 2010 campaign agenda that propelled them to the House majority. The earlier proposals wouldn't have allowed the deduction for income from banking, insurance, financing or investing. They also excluded golf courses, massage parlors, gambling operations, farms, hotels, restaurants, engineering firms, accounting firms and producers of pornography. Companies in those industries would be eligible for the break under the latest version of the bill, subject to the other limits and the definition of income. According to 2008 figures from the U.S. Census Bureau, of the 5.9 million companies that weren't sole proprietorships, 18,469, or 0.3%, had 500 or more workers. Those larger companies employed 50.6% of the U.S. work force. Groups that support the legislation include the International Franchise Association. Other business groups, such as the U.S. Chamber of Commerce, have taken a less definitive position. “The Cantor bill adds to the debate and underscores the need for comprehensive, fundamental tax reform,” said Blair Latoff, a chamber spokeswoman, in an e-mail. --Bloomberg News--