Republicans Propose Temporary “Stimulus” Tax Cut

Tuesday, March 13th, 2012 and is filed under Blog

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Next week, Republicans will announce a new plan to offer a short-term tax exemption for small businesses, roughly defined as companies with fewer than 500 employees.  Even though they have chided Democrats for “sugar-high” short-term tax breaks, they have no compunction about offering their own.  This, from the Hill:

After deriding the payroll tax cut as a short-term “sugar high” for the economy, House Republicans are rallying around a new temporary tax cut for small businesses.

GOP lawmakers acknowledge they would be setting themselves up for criticism by endorsing a temporary tax measure after taking a stand against the payroll tax holiday, and no final decision has been made. Many Republicans also insist they would prefer the small-business tax break be enacted permanently. […]

According to a summary of the proposal provided by House Majority Leader Eric Cantor’s (R-Va.) office, the plan would give millions of businesses with fewer than 500 employees — one federal definition of a small business — the ability to essentially exclude 20 percent of their income from taxation.

I guess any tax cut is better than no tax cut, and this one is superior to the payroll tax cut because it is not bankrupting Social Security’s supposed funding source.  However, why do Republicans need to support a temporary stimulus style tax break and expose themselves for criticism?  Why not offer a starker contrast by proposing a permanent pro-growth flat tax, and force Democrats in the Senate to go on record as opposing it?

Republicans might contend that they are not ready for permanent tax reform; however, there already is a plan out there that is ready to go.  The RSC proposed the Jobs Through Growth Act that permanently reduces income taxes.  Here are the highlights:

  •  Just two rates 15% (first $50,000 taxable income for single filers, $100,000 for joint filers) and 25% (taxable income above that);
  • A standard deduction of $12,500 for single filers and $25,000 for joint filers;
  • An additional deduction of $12,500 for each dependent; and
  • No other individual deductions or credits or exclusions
  • Also, after the initial choice is made, individuals are allowed one additional changeover
    between the two systems. Individuals are also allowed to
    change tax systems when a major life event (death, divorce, marriage) changes their tax filing status.