MN-02 : What Will Kline’s Tax Cut for the Super Bowl Champs Cost ?

Brett Neely at MPR has an interesting story about a tax cut that John Kline (R-MN-02) is pushing …

Republicans prefer to use are “growth” and “opportunity” — particularly for small business.

Which is why House Republicans, including 2nd District Rep. John Kline, have unveiled a one-year tax cut for companies that employ fewer than 500 workers.

What’s really fair is to have a policy in place that lets Americans get back to work,” Kline said.

Kline said the Buffett Rule puts the principle of fairness ahead of jobs and won’t raise nearly enough money to close the budget deficit.

Gosh, that cannot be John Kline talking … after all, he regularly bemoans that businesses won’t hire because of uncertainty and that one year is nothing … but that does sound like John Kline raising concerns about the deficit.

The bill in question is The Small Business Tax Cut Act, which would give a one-year, 20 percent tax cut to every business with 500 or fewer employees.

Thus a “small business” like the Super Bowl champion New York Giants, which has about 210 employees and made $1.3 billion last year, would get a tax cut … BTW … did you know that the National Football League has a Political Action Committee – GRIDIRONPAC which selectively donates monies to politicians including a nice round $5000 check to Mr. Kline’s campaign war chest.

Heck, even Oprah Winfrey, a billionaire, would get a big tax cut, because her production company employs about 400 people.

Reading the background on HR 9, the rationale seems that no business should be missed regardless of its profitability or desire to create jobs :

By providing all qualified small businesses with fewer than 500 employees—regardless of whether they are organized as passthrough businesses (S corporations or partnerships), sole proprietorships, or C corporations—a 20-percent deduction against active business income, H.R. 9 would help free up additional resources allowing small businesses to create more jobs in communities across the country.

In addition, the Committee recognizes the importance of family-owned and -operated businesses and notes that H.R. 9 contains certain rules designed to ensure that many such businesses would be eligible for this proposed benefit.

Thus far, H.R. 9 has been approved at the committee level with all favorable votes coming from Republicans and all negative votes from Democrats … BTW, Erik Paulsen (R-MN-03) voted in favor at the committee mark-up.

The Joint Committee on Taxation reports the budget impact as well as some other observations :

The bill will potentially have small, temporary stimulative effects.

The formula for determining the amount of the business deduction makes it possible for firms to maximize the deduction bonus without increasing output. Firms might not need to increase their productive capacity to take full advantage of the tax benefits of the bill. To the extent that firms could increase sales and or payroll to take advantage of the extra deduction without increasing longer-term costs, they can be expected to do that.

the one year of tax savings provided by the bill is unlikely to make the costs of much investment in physical capital or labor recruitment and training worthwhile.

The CBO states the deficit would increase by $45.95 Billion

Hmmmm … must be an election year … and Mr. Kline and his Republican-controlled Do-Nothing House needs something … but this makes no sense.

At a cost of $45.95 Billion, proposed small-business tax cut would skew its benefits overwhelming toward highly profitable businesses that just happen to have a small number of employees, while start-ups which really are the businesses that need workers to expand , typically lost money in their early years and do not pay taxes, will get nothing.

But this issue illustrates “who” these Republicans are concerned about … remember, the discussion about extending the Payroll Tax holiday ..

Capitol Hill Republicans are suddenly sounding skittish – including Minnesota Reps. Erik Paulsen and John Kline. Both congressmen voted last December to cut payroll taxes from 6.2 percent to 4.2 percent, but now have second thoughts.

“I’m hesitant to support a simple extension of this tax cut because I’m not convinced it’s going to result in meaningful employment for folks, and I’m concerned we’re not going to see that going forward. I’d much rather have a longer-term solution,” said Paulsen, who sits on the tax-writing Ways and Means Committee. “You know, I think we saw this with George Bush’s tax rebates. It didn’t stimulate the economy.”

Kline also expressed new doubts.

I don’t want to say flat out that I wouldn’t support it because it’s very hard for me to say I don’t support tax relief, but I don’t like this way of doing it,” he said.

One reason Kline says he’s uncomfortable: The tax cut will divert about $110 billion from Social Security, which he fears will weaken the system just as baby boomers are retiring.

… one year tax cuts costing $110 billion benefiting working families is bad

… one year tax cuts costing $45.95 billion benefiting profitable small business owners is good ???

Hmmm … that’s the rationale of our Minnesota Twins … the Political-Pandering Pair of Kline and Paulsen.

Tags: , , ,