With the payroll tax cut and unemployment insurance extensions completed to the end of the year, most observers don’t expect much action in Congress until the November elections. The fact that you can say that on February 20 is quite sad, but it also happens to be the truth. This Congress has shown no ability to get anything done without a crisis point. And nearly all of the crisis points will happen after the elections, unless by some quirk the country hits the debt limit in October.
House Majority Leader Eric Cantor claims to be soldiering on with a new set of jobs bills, necessary because the GOP has become defined by their attention to culture war issues rather than what brought them to the House majority. But these plans are either small beer or just another manifestation of the “tax cuts forever” ideology that’s so fashionable in Washington.
The first of the plans – dubbed the “JOBS Act” – would improve access to financing for small business plans and reform or remove regulations for starting a small business. Cantor said that the package drew from ideas suggested by the president’s Council on Jobs and should garner bipartisan support.
“We need to address the regulatory burden that small businesses are facing so we can see them start up again,” Cantor said on “Fox News Sunday.”
“This package represents the first opportunity for us post the payroll tax cut extension to work together in a bipartisan matter and get something done,” he added.
But in what is likely to be the far more controversial of the proposals, Cantor also proposed a 20 percent tax cut for small businesses.
“We’ll be bringing forward a bill that brings a 20 percent tax cut for small businesses knowing full well that small businesses create 60 percent of the lobs in this country,” Cantor said.
This last bit represents the GOP trying to build on the feedback loop that Democrats accomplished with the payroll tax cut, and it’s an example of why pilfering the other side’s policy ideas can end up being dangerous. Democrats were able to chip away at Republican credibility on tax cuts. But Republicans still know how to introduce tax cuts. And now that they’ve done so, with a large tax cut on small business (another area that Democrats have fetishized over the past couple years), they can just completely turn the tables on their adversaries. They can accuse Democrats of insufficient fealty to tax cuts. “If a tax cut is good enough for American workers, it’s good enough for the small businesses who employ them,” will be the rallying cry. And it just might work.
There are areas where tax relief could make sense for some businesses. Because of the benefits to mitigating climate change, I’d say renewing the Production Tax Credit for renewable energy is vital, unless we want all our water contaminated from fracking. Wind and solar power are at a critical point right now. But that’s a far cry from a 20% across-the-board tax cut for its own sake, which should be viewed skeptically as having any jobs impact whatsoever.
I should have kept a list of all the small business tax cuts that President Obama has signed over the past three years. The last I remember it was something like 18. They did little to actually solve an economic problem that almost entirely consists of weak demand for goods and services. Democrats might want to be careful about playing with the fire of tax cuts; they’re likely to get burned. Of course, to say this assumes that they don’t believe in a tax cut panacea policy, at least as a campaign strategy.