Why Are The Republicans Planning To Give Hedge Funds A 20 Percent Tax Break?

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"Why Are The Republicans Planning To Give Hedge Funds A 20 Percent Tax Break?"

House Republicans have been preparing to move a new jobs bill aimed at giving a 20 percent tax credit to small businesses. However, as Bloomberg News noted today, the tax break could very well be given to businesses that most certainly don’t need it — hedge funds:

A Republican proposal to give small businesses an extra 20 percent tax deduction may yield cuts for some multibillion-dollar hedge funds, law firms and other enterprises that create significant profits with few employees.

Republicans hope to release details of the bill during the week of March 19, said Laena Fallon, a spokeswoman for Representative Eric Cantor, the House majority leader. Cantor told House members in a memo last month his plan would let “every” business with fewer than 500 employees deduct 20 percent of its profits.

That approach would depart from restrictions in an earlier version.

Earlier versions of the bill would have prevented the break from applying to the financial industry. “They’re just trying to cut taxes for people with a lot of money,” said Citizens for Tax Justice Director Bob McIntyre. “That’s what they always do. That’s what they are.”

Hedge fund managers are some of the richest people in the world, making literally billions of dollars annually. Even at the depths of the Great Recession, the average hedge fund employee made nearly $800,000.

Hedge funds aside, there’s certainly no wisdom in giving every single small business a tax break because then firms that have been making huge profits will reap a windfall from the government for no real reason. If they are already making huge profits and aren’t hiring, it’s exceedingly unlikely that another tax break on top will change anything.

What’s really holding back small businesses is a lack of demand in the economy, and there’s no reason for businesses to hire, no matter how many tax breaks they receive, unless they have an expectation of more customers. As the chief economist for the conservative National Federation of Independent Business explained, “if you give a small business guy $20,000 he’ll say, ‘I could buy a new delivery truck but I have nobody to deliver to.'”

The Republicans’ plan, if this is the approach that they settle on, will amount to nothing more than another giveaway to financiers that are already bringing home huge paychecks.

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