Tumblr Icon RSS Icon

Why Eric Cantor’s $46 Billion Tax Boondoggle Will Cause A Real Headache For Small Businesses

By Guest Contributor  

"Why Eric Cantor’s $46 Billion Tax Boondoggle Will Cause A Real Headache For Small Businesses"

Share:

google plus icon

Our guest blogger is Seth Hanlon, Director of Fiscal Reform at the Center for American Progress Action Fund.

With Tax Day approaching, House Majority Leader Eric Cantor and the House GOP are pushing a $46 billion boondoggle they call the “Small Business Tax Cut Act of 2012.” As ThinkProgress has previously reported, the bill is really just a windfall for rich people, many of whom, like hedge fund managers, owners of sports teams, celebrities, lawyers, and lobbyists are not most people’s idea of “small businesses.” Cantor’s tax giveaway, half of which goes to millionaires, is also among the least effective ways to create jobs. (Our full analysis is here.)

So what do actual small businesses get? A big headache, according to a new “tax complexity analysis” of Cantor’s bill from the Joint Committee on Taxation (Congress’s nonpartisan tax experts) and the IRS. By adding a complicated new provision to the tax code, Cantor’s bill would mean small businesses would have more paperwork, more time wasted on tax filing, and more disputes with the IRS:

It is anticipated that small businesses that elect to apply the provision will need to keep additional records due to this provision, and that additional regulatory guidance will be needed…It is anticipated that the provision will result in an increase in disputes between small businesses and the IRS. [...]

The provision likely will increase the tax preparation costs for most affected small businesses. Small businesses will have to perform additional analysis concerning whether the small business has 500 or fewer employees and which income qualifies for the deduction allowed under the provision. For income that is determined to be eligible for the deduction under the provision, small businesses will be required to perform additional calculations to determine the amount of the deduction…[S]mall businesses will be required to undertake calculations to determine the amounts of costs that are allocable to domestic business gross receipts. In some cases, small businesses would not have been required otherwise to perform these calculations but for the provision.

Due to the detailed calculations required by the provision, it is anticipated that the Secretary of the Treasury will have to create a new form for qualified small businesses to compute the deduction and will have to make appropriate revisions to several types of income tax forms and instructions. In addition, the Secretary of the Treasury will have to issue guidance to carry out the purposes of the provision.

The IRS adds that the new tax form required by Cantor’s bill, Form 8903-A, “would be complicated.”

By creating a complicated new loophole, available to some business but not to others according to arbitrary rules, and favoring the very rich, the Cantor bill epitomizes everything that is wrong about the tax code.

Ironically, the House GOP just passed a budget bemoaning the tax code’s “labyrinth of deductions” and promising tax reform to close special loopholes and carveouts (though it did not identify a single loophole that it would close). In less than three weeks, House Republicans have done a complete 180, abandoning their showy commitment to tax reform and carving out a new $46 billion loophole. The Cantor bill is the “antithesis of tax reform” according to Rep. Sandy Levin (D-MI), the top Democrat on the House Ways and Means Committee.

But at least the GOP budget and the Cantor bill are consistent about one thing – more windfall tax cuts for the rich.

‹ Econ 101: April 16, 2012

Mitt Romney Tells Rich Donors His Secret Plan To Cut Housing Assistance ›

By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.