Both the Washington Post and the New York Times today have articles on Democrats and Republicans vying for to be seen as more supportive of small businesses. “At the core of some of the major policy fights in Washington these days is a ferocious competition between Republicans and Democrats over which party is the champion of America’s small businesses,” the Times wrote.
Republicans loudly claim that Democrats have “hit small business with a sledgehammer,” but when given the opportunity to provide tax credits and lending capacity to small businesses today, they instead chose obstruction. The Senate failed to invoke cloture on a bill creating a lending fund for small businesses and providing those businesses with a series of tax credits, on a 58–42 vote. All Republicans voted against the bill (and Senate Majority Leader Harry Reid (D-NV) switched his vote at the last moment as a procedural matter, which allows him to bring the bill up again later).
For months, Republicans in the Senate have been bogging down this particular bill by threatening to attach a cut in the estate tax to it, which would benefit just the richest 0.25 percent of households in the country. And at the same time, the GOP has been waging an intense campaign to extend the Bush tax cuts for the wealthy, because they falsely claim that a failure to do so would be a blow to small businesses.
But as Dylan Matthews pointed out, IRS data shows that “the filers reporting small business income who would be affected by letting the tax cuts expire come disproportionately from the ranks of the super-rich.” In fact, the Tax Policy Center has made the case that the Bush tax cuts actually harm small businesses, because their cost of capital goes up as the deficit increases, and the cuts made the tax code more corporation-friendly:
While the 2001–2003 tax cuts were described as “pro-entrepreneur,” a recent study found that the majority of taxpayers would see their tax burden rise, once the eventual financing of the cuts was taken into account. Specifically, the study found that 72 percent of taxpayers with business income would be worse off if the tax cuts were eventually paid for by proportional financing, and that 58 percent of filers with business income would be worse off if the cuts were eventually paid for with equal-dollar financing.
Even those Republicans who supported the small business lending bill — like Sen. George LeMieux (R-FL) and Sen. Olympia Snowe (R-ME) — voted against it today, claiming that they didn’t have ample opportunity to attach amendments. So in the end, Senate Republicans had the chance to do something helpful for small businesses, but decided obstruction was the more productive route.