Updated March 25 at 12:28am

Small biz plans hint at split on tax code overhaul


WASHINGTON – Democrats and Republicans in the U.S. Congress are using the run-up to the April 17 tax-filing deadline to test some of the arguments they want to deploy during a broader tax-code rewrite.

Both parties are offering temporary tax incentives designed to spur small-business growth. They’re pulling different policy levers to appeal to the same favored group during tax season, with Democrats proposing targeted tax breaks and Republicans backing rate cuts.

Senate Democrats yesterday unveiled a $26 billion tax cut plan for companies that make capital investments and expand their payrolls. House Republicans tomorrow are set to push through the Ways and Means Committee a 20 percent tax cut that would direct $45.9 billion to businesses with fewer than 500 workers.

“They’re good symbols of the two different approaches, but I think they’re also unlikely to be bridged,” said Todd McCracken, president of the National Small Business Association in Washington.

Lawmakers of both parties favor benefits for small companies in part because mom-and-pop businesses are among the most popular institutions in the country. A 2011 Gallup poll found that 79 percent of Americans trust small business owners to come up with ideas for job creation, outpacing both parties’ leaders in Congress, who polled at less than 45 percent.

Uncertainty, complexity

McCracken said benefits from the temporary proposals would be countered by the uncertainty they create and the complexity they require.

“All the temporary tax provisions that we’ve seen enacted and talked about the last few years really has crystallized in small business owners’ minds the need for a total overhaul of the tax code,” he said. “You realize more and more this is no way to run a railroad.”

Lawmakers in both parties say they want to rewrite the U.S. tax code to make it simpler and more consistent. While they do that, they are proposing short-term tax breaks.

The Democratic proposal, released by Senate Majority Leader Harry Reid and New York Senator Charles Schumer, would revive a tax break that expired at the end of 2011. Companies would have another year in which they could write off 100 percent of capital investments.

That 100 percent write-off could benefit larger companies able to accelerate their investments to take advantage of it. Companies including Textron Inc. and Time Warner Cable Inc. are lobbying for the tax break, according to Senate records.

Expanding payroll benefit

The Democrats’ plan also would provide a 10 percent income- tax credit for the first $5 million that a company adds to its payroll in 2012, either through wage increases or hiring. The cap, which limits the benefit to $500,000, directs the largest percentage benefits to smaller companies.

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