Fox: Eric Cantor Wants To “Giv[e] The Middle Class A Tax Break,” But Obama Will Veto His Plan

Doocy: “The President Will Veto” Cantor's Effort To Give “The Middle Class A Tax Break.” On the April 18 edition of Fox News' Fox & Friends, co-host Steve Doocy teased an interview with Cantor by claiming: “President Obama obsessed with taxing millionaires. But how about giving the middle class a tax break instead? Eric Cantor wants to do just that. But Democrats are vowing to stop him, and the president will veto his suggestion.” [Fox News, Fox & Friends, 4/18/12]

Fox's Carlson: Obama Opposed To Cantor's “Bill That Creates Thousands Of Jobs.” Later on the April 18 broadcast, co-host Gretchen Carlson interviewed Cantor, claiming his bill “creates thousands of jobs” and later claiming the tax cuts included in the bill would affect “99.9 percent of U.S. companies,” asking, “Why would the Democrats and President Obama be against this?” From Fox & Friends:

CARLSON: Republicans ready now to pass a bill that creates thousands of jobs, but the White House already has the veto pen out. Joining me now, the person who sponsored the Small Business Tax Cut bill, House Majority Leader Eric Cantor. Good morning to you, Congressman.

CANTOR: Gretchen, good morning.

CARLSON: All right, so explain this. It has to do with the number 20 -- and you're talking about a tax cut for small business. What is it?

CANTOR: Well, right now, first of all, we're in tax week. Everybody in America has now filled their taxes out and paid the government and reminded again of the fact that Washington continues to want to take more and more of your hard-earned money. We also know that we've got a situation in the economy, we need to see more jobs created and more economic growth.

How do you do that? You look to the job generators, the small businesses of America that create over 65 percent of the jobs. So what this bill does, the Small Business Tax Cut Act that will come to the House floor tomorrow, it provides every small business with 499 employees or less the ability to have a 20 percent tax cut straight up, money to the bottom line. So that small-business men and women can have more money to put back into their business, to grow the business, and create jobs.

CARLSON: Now I understand that it's for businesses that have fewer than 500 employees, but that covers 99.9 percent of U.S. companies. Why would the Democrats and President Obama be against this?

Carlson later suggested that Obama opposes the bill “because it goes against the narrative of this whole Buffett Rule that seems to be what's going to be the campaign lingo moving forward.” [Fox News, Fox & Friends, 4/18/12]

In Fact, The Administration Opposes The Bill Because It Focuses On “Tax Cuts [For] The Most Fortunate”

Obama Administration “Strongly Opposes” Cantor's Bill Because It Would “Provide Tax Cuts To The Most Fortunate.” In an April 17 statement, the Obama administration expressed its opposition to Cantor's bill -- H.R. 9, the Small Business Tax Cut Act -- because it “is not focused on cutting taxes for small businesses, but instead would provide tax cuts to the most fortunate.” From the White House:

The Administration strongly opposes House passage of H.R. 9. The President believes that small business tax relief can promote hiring workers and increasing investment here at home. H.R. 9, however, is not focused on cutting taxes for small businesses, but instead would provide tax cuts to the most fortunate. Under the bill's definition of income, many of the “small businesses” that would receive the largest tax breaks are law partners, consultants, and other wealthy individuals and corporations with the biggest profits. The proposal is a giveaway that will cost $46 billion and could, in fact, lead to delays and reductions in investment and hiring.

While H.R. 9 has been described as a way to help small businesses, independent non-partisan analyses confirm that 49 percent of the bill's benefits would go to taxpayers making more than $1 million per year. Individuals in higher tax brackets would be able to take the bill's deduction against higher tax rates, making it more valuable for higher earners and more profitable firms. For the one percent of individuals with small business income in the top tax bracket and for profitable corporations, the deduction is worth more than double what it is worth to the two-thirds of small business owners in the 15 percent bracket or lower. Moreover, because “small business” is broadly defined and the tax relief is conditioned only on the size of payroll, many very large and highly profitable firms will be eligible for the tax break. The Administration believes that this bill is not an effective way to incentivize small business investment and job creation.

[...]

If the President is presented with H.R. 9, his senior advisors would recommend that he veto the bill. [White House, 4/17/12, emphasis in original]

And Experts Agree With The President: The “Vast Bulk” Of Tax Cuts In Cantor's Bill Would “Accrue To Millionaires” And Wouldn't Create Jobs

Former Bush Official Bruce Bartlett: “The Vast Bulk Of The Tax Savings Under The Republican Plan Would Actually Accrue To Millionaires.” In a March 30 Fiscal Times column about H.R. 9, former Reagan and George W. Bush official Bruce Bartlett noted that “the vast bulk of the tax savings under the Republican plan would actually accrue to millionaires.” From The Fiscal Times:

The New York Giants (and probably every other professional sports franchise) would get a tax cut because it has just 210 employees, according to Roll Call. Billionaire Oprah Winfrey would also get a tax cut because her production company employs just 400 people.

According to a Treasury study, the bulk of small businesses don't have any employees at all. Of 19 million such businesses in 2007, fewer than 5 million had employees. Many are what are called pass-through entities that exist largely on paper as tax avoidance devices for the wealthy.

Consequently, the vast bulk of the tax savings under the Republican plan would actually accrue to millionaires. According to the Tax Policy Center, just 5.6 percent of the benefits would be realized by those with gross incomes below $100,000, with 49 percent going to those with incomes above $1 million. The Joint Committee on Taxation estimates the gross revenue loss at $46 billion over the next two years. [The Fiscal Times, 3/30/12]

CBPP: Cantor Bill “Would Provide Windfall For Wealthy, Not Create Jobs.” In a March 28 report, the Center on Budget and Policy Priorities (CBPP) found that the bill “would benefit many high-income taxpayers ... while failing to generate the promised economic benefits.” From the CBPP:

Though billed as a measure to create jobs by aiding small businesses, House Majority Leader Eric Cantor's (R-VA) proposal for a 20 percent tax deduction in 2012 for businesses with fewer than 500 employees would benefit many high-income taxpayers -- including many affluent doctors, lawyers, and stockbrokers -- while failing to generate the promised economic benefits. The Urban-Brookings Tax Policy Center estimates that nearly half -- 49 percent -- of the $46 billion tax cut that the measure would provide would go to people with incomes over $1 million a year.

The Congressional Budget Office (CBO) rated this general approach as one of the least cost-effective ways that policymakers were considering to encourage growth or create jobs in a weak economy. For one thing, the tax benefits would flow disproportionately to high-income people who would spend a relatively small share of their additional income; thus, CBO estimated that the deduction would generate just 0 to 20 cents in economic growth for every dollar in budgetary cost. For another, firms would receive this tax break whether they hired new workers or not; thus, CBO estimated that in 2012 it would create one job or fewer per $1 million of budgetary cost. [CBPP, 3/28/12]

LA Times' Hiltzik: Cantor's Bill “Is A $46-Billion Giveaway To The Wealthy In Small-Business Sheep's Clothing.” In an April 17 column, the Los Angeles Times' Michael Hiltzik called Cantor's bill “a $46-billion giveaway to the wealthy in small-business sheep's clothing.” Hiltzik further noted:

Another flaw is that the bill removes provisions in an earlier version that would have disqualified firms in finance, law, healthcare and other high-income, low-headcount fields. (This may be why it has the support of the American Dental Assn.) It would apply to partnerships, limited liability companies, medical offices, sole proprietorships and many other “pass-through” business arrangements, so called because their tax liabilities pass through to their owners.

That could mean a tax cut for law firms, hedge funds and sports teams. Unlike the plan being drafted by Senate Democrats that would tie a tax cut to actual hiring, the Cantor measure covers any entity claiming business income, regardless of its hiring plans. “If all it takes is a little business income to reduce one's overall tax bill by 20%,” observes the Tax Foundation's William McBride, “we can expect to see a lot more yard sales and EBay entrepreneurs.” [LA Times, 4/17/12]

Tax Policy Center Analysis Shows Change To Baseline Disproportionately Benefits Already-Wealthy Individuals. In a March 28 analysis, the nonpartisan Tax Policy Center found that 49 percent of the changes in tax included in Cantor's bill would go to filers with a cash income level of more than $1 million. From the Tax Policy Center:

[Tax Policy Center, 3/28/12]

NY Times Editorial: Bill Is “Designed So That Nearly Half Of The Tax Cut Would Go To People With Annual Income Over $1 Million.” An April 14 New York Times editorial called the bill a “particularly cynical” example of “the Republicans' latest effort to tilt the tax code in favor of the wealthy.” From the New York Times editorial titled, “More Help for the Wealthy”:

Taxes are never popular, especially in April of an election year. But the Republicans' latest effort to tilt the tax code in favor of the wealthy, and starve the government of needed revenue, is particularly cynical.

This week, the House Republican leadership is expected to bring up the “Small Business Tax Cut Act,” a bill to let most business owners deduct up to 20 percent of their business income in 2012 -- a $46 billion tax cut. Despite the Mom-and-Pop label, it is designed so that nearly half of the tax cut would go to people with annual income over $1 million, and more than four-fifths would go to those making over $200,000, according to the Tax Policy Center.

[...]

The bill is predicated on an overly broad definition of “small business” -- one with fewer than 500 employees, which can include multimillion-dollar partnerships and corporations. It is also based on a willful denial of the reality that small businesses are not the big job creators politicians often say they are. [The New York Times, 4/14/12]

Tax Foundation: Cantor's Bill Can “Easily Be Gamed” And Does Not Create “The Kind Of Incentives We Want In The Tax Code.” In a March 29 blog post, William McBride of the nonpartisan Tax Foundation wrote:

To deal with this, Representative Cantor and Senator Reid have each proposed reducing taxes on small business. However, rather than simply cutting the rate, or preventing rates from going up at the end of the year, they propose various special carve outs for small business, further complicating the tax code. One problem is defining small business.

The Cantor proposal would define it based on number of employees, i.e. fewer than 500. That's pretty straight forward, but how would a business with 500 employees respond? If a company can save 20% on their tax bill by not hiring any more employees, that's not the kind of incentives we want in the tax code. Also, it can easily be gamed: if all it takes is a little business income to reduce one's overall tax bill by 20%, we can expect to see a lot more yard sales and ebay entrepreneurs. [Tax Foundation, 3/29/12]