House lawmakers voted 424-0 to retain through 2007 a tax break for small businesses that lets them immediately deduct up to $100,000 in investments. Left unchanged, the amount of new investment that businesses could write off would drop to $25,000 starting in 2006.
The extension would cut taxes for businesses by nearly $11 billion in 2006 and 2007. Over a decade, however, tax writers expect money flowing into the U.S. Treasury (search) would be reduced by just $1.2 billion.
Supporters said the tax break has helped companies expand and invest in technology, machinery and other equipment. The extended small business tax break was one part of two bills offered to simplify taxes for families and companies.
"Clearly, we need to make our tax code more user-friendly," said Rep. Rob Portman, R-Ohio.
Democrats said the GOP has talked a lot about simplifying taxes but acted to make them more complicated.
"This is nonsense," said Rep. Jim McDermott, D-Wash. "It doesn't do any harm really; it doesn't do any good really."
The bill for businesses also permits more companies to use a simpler accounting system, which lets businesses account for a transaction when cash is received or paid for goods or services, instead of counting the transaction at the time the goods or services were received or delivered.
A second bill, passed in the House by voice vote, aimed to simplify taxes for individuals. It would let taxpayers with up to $100,000 in taxable income, including interest, use the simpler 1040EZ and 1040A tax returns.
Current rules only let taxpayers with $50,000 or less in taxable income use the simpler forms. The Internal Revenue Service can make the change without instructions from Congress, but bill sponsors said they wanted to use legislation to encourage a change.
The bill also aims to reduce taxpayers' confusion by changing the "head of household" filing status to "single head of household."
Portman said 6 million taxpayers chose the wrong filing status because they misinterpret head of household status to include married couples. "Some of them get audited because of that," he said.