WASHINGTON — The House on Thursday passed a $46 billion tax cut that would benefit almost every business in the country, after a class-conscious debate that highlighted the gulf between the parties as the sluggish recovery drags on.
The Republican majority pressed its one-year 20 percent cut to taxes on businesses with fewer than 500 employees. Democrats countered with the Buffett Rule, a $47 billion tax increase on the nation’s richest households.
In the conservative House, it was no contest. The tax cut won, 235 to 173, with 18 Democrats voting yes and 10 Republicans voting no. The Buffett Rule lost, 234 to 179, with five Democrats opposing it.
The House’s tax cut is not likely to go far. Senate Democratic leaders unveiled their own much more limited tax incentive for hiring, which will probably come to a vote late next month. That measure would give a 10 percent tax credit for new hiring this year and extend an expired break that last year allowed businesses to deduct immediately the cost of new plants and equipment.
Senate Democratic leaders said they would welcome House and Senate negotiations on the two small-business tax cuts if theirs could overcome the 60-vote filibuster hurdle.
But the House debate over taxes neatly encapsulated the stakes of the November election. Democrats labeled the House business tax cut as a multibillion-dollar giveaway to the rich just as Republicans are moving ahead with deep cuts to programs for the poor. Republicans accused Democrats of waging class warfare and of supporting economic policies that would mire the nation in economic decline.
“We are for fairness, but in a different way,” said Representative Pete Sessions, Republican of Texas. “Fairness comes from getting a job.”
The House measure is drawn broadly, allowing any company with fewer than 500 employees to shield 20 percent of domestic business income from taxation. That would apply to more than 99 percent of businesses, including most law firms and sports franchises, as well as partnerships like lobbying firms and hedge funds. Representative Xavier Becerra, Democrat of California, said the socialite Paris Hilton would qualify, because she lists five employees in her Beverly Hills company. He also asserted that Larry Flynt’s pornography empire would benefit.
“This isn’t about Paris Hilton or Larry Flynt,” countered Representative Kevin Brady, Republican of Texas. “It’s not about celebrities. It’s about small businessmen.”
The debate between the business tax cut and the Buffett Rule, which would set a minimum tax rate of 30 percent for households earning at least $1 million a year, had little to do with economic growth. The bipartisan Joint Committee on Taxation said the tax cut’s impact on the economy would be “so small as to be incalculable.” Representative Eric Cantor of Virginia, the House majority leader, commissioned Gary Robbins, who created Herman Cain’s 9-9-9 tax plan, to analyze the business tax cut, which Mr. Cantor drafted. The conclusion was that in the year it would exist, it would create 39,000 jobs, at a cost in tax revenue of $1.2 million per job.
Much of the debate was on Democratic grounds: Who benefits? The nonpartisan Tax Policy Center estimated that 49 percent of the $46 billion in tax breaks would go to households earning more than $1 million.
But in a sluggish economy, Republicans said that was the price to pay for bringing relief to struggling small businesses.
“To say you can’t help the middle class because somehow there will be beneficiaries above the middle class doesn’t make sense to me,” Mr. Cantor said.
The gulf between the two parties darkened the push for overhauling the tax code, which Republicans and Democrats say must be done soon. Representative Dave Camp, a Michigan Republican who is the chairman of the Ways and Means Committee, began planning sessions with the Republican rank-and-file this week on a tax overhaul, amid a growing clamor from freshman conservatives demanding progress on tax simplification.
And Republicans are in talks about pushing a bill to extend the Bush-era tax cuts of 2001 and 2003 before the November election, and ahead of their expiration in January, said Representative Pat Tiberi of Ohio, the chairman of the Ways and Means subcommittee on taxes.
In that sense, the fight between the Buffett Rule and the business tax cut was a sidelight, informed more by the election than by the coming tax effort, Mr. Tiberi conceded.
“We’re in a transition period between now and the election,” he said. “Both of these issues are not permanent issues.”
