All News & Blogs
Cantor proposes tax cut for small businesses
Visit the Photo Place
BY CHELYEN DAVIS
Virginia Rep. Eric Cantor, 7th District, this week proposed a bill in Congress that would give small businesses a 20 percent tax deduction.
The deduction would apply to businesses with fewer than 500 employees, and could be used by any such business, regardless of whether it's organized as a pass-through or a corporation. The business could take a 20 percent deduction on its income taxes, up to 50 percent of its W-2 wages.
In announcing the bill, Cantor said it should help mitigate the effect on small businesses of the U.S. corporate tax rate, which is 35 percent.
A Tax Foundation study last year found that between 1994 and 2008, the effective corporate tax rate in the U.S.--the rate companies paid--was more like 26 percent. But the difference lay largely in foreign income taxes paid by companies that do a lot of foreign business, and the study said that smaller companies and those whose business is primarily domestic pay a tax rate closer to the 35 percent statutory rate.
Lawmakers from both parties have talked about lowering the U.S. corporate tax rate and simultaneously eliminating many tax credits and exemptions.
But that hasn't happened yet, and Cantor said his bill will help save small businesses money, which they could then use to expand their businesses and hire more workers.
"What the bill will do is it--bottom line--will put more revenues, more money into the hands of small business owners so that they can reinvest those funds to retain and create more jobs and to grow their business," Cantor said in a press release.
He said about 22 million small businesses in the U.S. could take advantage of his proposed deduction.
Under an example on Cantor's congressional website, if a business had $100 in income, and deducted 20 percent, it would then pay the 35 percent corporate tax rate on $80, rather than on $100.
Democrats in Congress have said they would prefer to see a broader effort at tax reform.
Cantor also said he'll schedule a vote this coming week on the JOBS Act, a package of bills with the rare distinction of having bipartisan support. The president backs it and the Senate passed an amended version last week.
As originally introduced, the JOBS Act allowed small securities companies to advertise for investors; lets companies pool money from a group of investors, up to a limit, without filing with the SEC; doubles the shareholder threshold at which businesses have to file as a public company; and contains other easements to federal regulations for small businesses.
Chelyen Davis: 540/368-5028