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In a face-off between the heads of the Republican National Committee and Democratic National Committee on NBC's Meet the Press on June 11, 2011, the discussion turned to what the government should be doing to accelerate job creation.
"I think we need to cut taxes on small businesses," said RNC Chairman Reince Priebus.
"Well, that's good," retorted DNC Chair Rep. Debbie Wasserman Schultz, D-Fla., "because we've done that, 17 times."
Looking out for small businesses is a mainstay of political rhetoric these days. "The small business community is sort of a favored group on which to shower tax breaks," said Joseph Rosenberg, research associate at the nonpartisan Tax Policy Center.
But have there been 17 tax cuts for small businesses by the Obama administration?
Asked for backup, the DNC press office pointed us to a Feb. 25, 2011, posting on the official White House blog titled "Seventeen Small Business Tax Cuts and Counting." The post enumerates 17 small business tax cuts and credits created or extended through legislation signed by President Barack Obama.
Eight of them were included in American Recovery and Reinvestment Act (aka the economic stimulus), the Affordable Care Act (aka the health care law), and the Hiring Incentives to Restore Employment Act (aka the Hire Act). Among the cuts: the exclusion of up to 75 percent of capital gains on key small business investments; a tax credit for the cost of health insurance for small business employees, and new tax credits for hiring Americans out of work for at least two months.
Another eight came via the Small Business Jobs Act, signed by President Obama in September of 2010. These included: adding deductions for business cell phone use; creating a new deduction for health care costs for the self-employed; allowing greater deductions for business start-up expenses; eliminating taxes on all capital gains from key small business investments, and raising the small business expense limit to $500,000. Three months later, the president signed a tax bill that raised the expense limit to 100 percent of small business new investments until the end of 2011. It also extended the elimination of capital gains taxes for small business investments through the end of 2012.
Here's the full list:
From the Recovery Act, HIRE Acts, and Affordable Care Act:
1. A new small business health care tax credit
2. A new tax credit for hiring unemployed workers
3. Bonus depreciation tax incentives to support new investment
4. 75 percent exclusion of small business capital gains
5. Expansion of limits on small business expensing
6. Five-year carryback of net operating losses
7. Reduction of the built-in gains holding period for small businesses from 10 to 7 years to allow small business greater flexibility in their investments
8. Temporary small business estimated tax payment relief to allow small businesses to keep needed cash on hand
From the Small Business Jobs Act:
9. Zero capital gains taxes on key investments in small businesses
10. Raising the small business expensing to $500,000
11. An extension of 50 percent bonus depreciation
12. A new deduction for health care expenses for the self-employed
13. Tax relief and simplification for cell phone deductions
14. An increase in the deduction for entrepreneurs’ start-up expenses
15. A five-year carryback of general business credits
16. Limitations on penalties for errors in tax reporting that disproportionately affect small business
And from the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act:
17. 100 percent expensing
Tax experts at conservative think tanks like Heritage and Americans for Tax Reform don't quibble much with the list, but they do with the context. "I can't argue with any of these, but it ignores all the proposed and enacted tax hikes on small business," said Ryan Ellis, director of tax policy at Americans For Tax Reform.
For example, he said, it ignores President Obama's proposal to allow Bush-era individual income tax cuts to expire for those making more than $250,000. "A clear majority of small business profits are earned in households making at least $250,000 per year." Ellis said. "...That's a tax hike on the small business sector."
There are also a number of tax increases included in the health care law, Ellis said, some of which apply directly to small businesses. For one, he said, businesses with more than 50 employees could face a tax penalty if they don't provide enough health insurance to their employees. Another example, the 10 percent tanning tax, which he said is "nearly exclusively applied to small businesses."
"So the overall story is much more of a problem for small firms than the Obama administration would suggest," Ellis said.
Curtis Dubay, senior tax policy analyst at the conservative Heritage Foundation, allowed that "there have been targeted tax cuts for small businesses." But, he said, "it's an error to just point to the number of tax cuts. You have to look at the overall impact and that certainly has been steep tax hikes."
Dubay also noted that six of the 17 cuts were not just for small businesses but were made widely available to all businesses.
Richard Morrison at the Tax Foundation, a pro-business group, said that "nothing on (the White House list) stands out as egregiously unjustified from a fact-checking perspective. Some of them are temporary, and some aren’t targeted exclusively at small businesses, but that doesn’t necessarily mean they shouldn’t 'count' as far as Rep. Wasserman Schultz’s claim is concerned."
We think there's room for critics to note that in addition to the 17 tax cuts enumerated by the White House, there are there are also some tax increases in the health care law that will fall on some of the same small business owners that got tax cuts. Some health care law tax increases won't go into effect for a couple years. And with some, like the excise taxes on tanning beds, one could argue it is a tax on the customer, not the small business. As for allowing the Bush tax cuts to expire, that might certainly affect a number of small business owners. But that's still just an Obama proposal. It hasn't happened. The only policy actually signed by the president so far was a compromise agreement that extended the tax cuts through 2012. So we rate Wasserman Schultz's comment Mostly True.
MSNBC, Video: RNC, DNC debate, June 11, 2011
White House Blog, "Seventeen Small Business Tax Cuts and Counting," posted by Kori Schulman, Feb. 25, 2011
White House website, The Recovery Act
White House website, The Affordable Care Act
White House website, Press release on the HIRE Act, March 18, 2010
White House website, Press release on the Small Business Jobs Act, Sept. 27, 2010
White House Blog, "White House White Board: Tax Cuts, Unemployment Insurance & Jobs," posted by Jesse Lee, Dec. 9, 2010
Americans for Tax Reform, "Obamacare Tax Hikes: One Down, Twenty to Go"
Interview with Curtis Dubay, senior tax policy analyst at the Heritage Foundation, June 13, 2011
Interview with Joseph Rosenberg, research associate at the Tax Policy Center, June 13, 2011
E-mail interview with Ryan Ellis, director of tax policy at Americans For Tax Reform, June 13, 2011
E-mail interview with Richard Morrison at the Tax Foundation, June 13, 2011
E-mail interview with Brad Woodhouse, a spokesman for the DNC, June 13, 2011
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