Tax Break Depends On What Your Definition of Small Business Is



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On Wednesday, the House Ways and Means Committee approved a bill that House Majority Leader Eric Cantor (R-VA) introduced last week: the “Small Business Tax Cut Act.”  As it stands right now, a lot of truly small businesses would not actually qualify for the deduction it offers, for 20 percent of “small business” income.

Think of a mom-and-pop mail-order business or the local shoe repair shop where you see the owners working hard every day, but no other employees. Because the bill caps the deduction at 50 percent of the wages paid to non-owners, many family businesses won’t qualify because their only employees are family members who are owners.

While the legislation caps the amount of the deduction (at half of non-employee payroll), there is no limitation on the type or amount of income that business can have. So highly profitable operations like Oprah Winfrey’s production company or the Trump Tower Sales & Leasing office would both qualify for the deduction simply because they have fewer than 500 employees on payroll.

Who else would qualify? Professional sports teams (including teams owned by Mitt Romney’s friends) with their multi-million-dollar salaries to non-owner players. So would private equity firms, hedge funds, and other “small businesses” with income in the millions, or even billions, of dollars, along with most of the top law and lobbying firms inside the Beltway and elsewhere.

The bill is currently projected to cost $45.9 billion in its first year – but its benefits are not at all clear. So far it seems that in Rep. Cantor’s dictionary, “small business” is defined as “my rich friends.”

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