House GOP Bill Would Cut Small Business Taxes

ALAN FRAM

WASHINGTON (AP) — House Republicans plan legislation granting small businesses — and potentially nearly every company in the country — a 20 percent income tax deduction, a GOP leader said Wednesday as the party stepped up its election-year competition with President Barack Obama over job creation.

The tax cut would apply to every business with fewer than 500 employees, House Majority Leader Eric Cantor, R-Va., said in a memo released to reporters.

If the bill makes no exceptions, that means the reduction would apply to 99.9 percent of the nation's 27.3 million firms, according to Census Bureau data for 2008, the most recent year available. Companies of that size employ about half the country's 121 million paid workers, the Census data shows.

While there is no formal definition of a small business, most industries use 500 employees as the cutoff, as does the Small Business Administration when it conducts research, according to a Treasury Department paper issued last summer.

The bill is to be introduced next month. An aide said the deduction would apply to businesses filing either individual tax returns, as many do, or corporate returns, but added that no decisions have been made about the measure's price tag, how long the tax cut would last or other details.

A deduction is an amount taxpayers can deduct from their income before they determine how much they owe in taxes.

Cantor announced the proposal a day after Obama said lawmakers should quickly enact his own menu of tax breaks for small businesses, including some GOP-written measures that have already started moving in Congress.

Illustrating the political stakes involved, Cantor emphasized that the GOP proposal would help small businesses "retain and create new jobs" and set a symbolic goal of approving the bill by mid-April, when federal income taxes are due.