Senator Chuck Grassley remains a loud and proud voice for extending all the Bush tax cuts, as he and Democratic challenger Roxanne Conlin argue over who is the real advocate for small business interests.

That and other news from the U.S. Senate race is after the jump. You can also view Conlin’s second television commercial of the general election campaign, which introduces her as “one tough grandma.”

Grassley wrote a guest editorial for U.S. News and World Report this week, making the case for extending the Bush tax cuts for the wealthiest Americans. National polls consistently show a majority supports ending the cuts for the highest incomes, but Grassley claims doing so would dramatically increase unemployment:

Those who support raising taxes on upper-income taxpayers say the increases would affect only 2 to 3 percent of small businesses. But 3 percent doesn’t tell us anything about how many jobs are at stake. The 3 percent figure treats a one-person hot dog stand the same as a 100-worker metal fabrication plant. More than 20 million workers are employed by those firms directly targeted by the higher marginal tax rates. These small business owners would see a 17 to 24 percent increase of their marginal tax rates.

Small businesses are typically organized as flow-through entities, meaning the owner files his business taxes on his individual tax form. The small business income is taxed at the individual rates.

Fifty percent of all flow-through business income would get hit with the Democratic leadership’s proposed tax rate increases. That’s according to the nonpartisan Joint Committee on Taxation. If you own a 100-worker metal fabrication plant, and your taxes go up 17 to 24 percent, you’ll likely stop hiring or lay off workers to compensate. Small businesses create 70 percent of new jobs, so it’s disastrous for job creation to raise taxes on small businesses.

There are many ways to stimulate job creation more effectively than handing over huge tax breaks to the wealthiest individuals, most of whom don’t own small businesses. This issue should become one of the clearest contrasts between Grassley and Conlin. She stated emphatically during last weekend’s joint appearance on Iowa Public Television that she favors extending tax cuts only for incomes below $250,000 per year:

I would extend the Bush tax cuts for 98% of the people in the United States of America.  I would let them expire the top 2%.  Senator Grassley’s campaign has misrepresented my position on this issue repeatedly so let me be very clear.  There are 18,000 people in Iowa whose taxes would be modestly raised under the proposal that I support but we would close the deficit, much of it created by Senator Grassley and the finance committee.  We would close the deficit by $700 billion by taking that step.  People who make over $250,000 a year would get an increase in their taxes of a quite modest 3%.

U.S. News contributing editor John A. Farrell pointed out a few holes in Grassley’s argument:

What Grassley doesn’t give us are facts. Exactly how many small business owners file as individuals and yet hire a significant number of new employees? How many are just partners in high-grossing partnerships that don’t generate new jobs? At what point do small businesses typically incorporate? If we raise the threshold to, say, $300,000 per household, would we exempt the folks we need to encourage? How much would that cost? What about the other “middle class” tax cuts that President Obama wants to preserve, which will apply to everyone–even those making more than $250,000 a year–and the business and research credits? Won’t they compensate the real job creators?

But most of all, Chuck, why for the sake of a few hard working men and women that we probably can figure out a way to reward should we extend those tax breaks to all the rich–to all the corporate executives, Wall Street speculators, athletes, entertainment celebrities, and benefactors of inherited fortunes who earn beaucoup dollars a year, and create no jobs at all, and are just going to salt the money away in banks that are already swollen with cash and refusing to loan it and create jobs?

Until I get the answers to those questions, I’m not persuaded. Grassley’s argument looks like a smokescreen. And it would add $3 trillion to the national debt. Some conservative.

It’s not clear yet whether Congressional Democrats are smart enough to vote on extending only some of the tax cuts before the election. If they do, Grassley will have to make a choice: approve tax cuts for 98 percent of Iowans or try to block them because he wants more for the top 2 percent.

Today the Senate approved the Small Business Jobs and Credit Act of 2010, which “would create a $30 billion lending program and provide small businesses with $12 billion in tax breaks, including more generous write-offs for equipment purchases.” Dean Zerbe discussed the bill’s major provisions at Forbes.com earlier this year. Grassley is on record supporting the tax breaks in the bill, but he was unable to get an amendment added to extend the biodiesel tax credit that expired at the end of 2009. From a statement released by Grassley’s Senate office today:

WASHINGTON – Senator Chuck Grassley today said that clean, green biodiesel jobs have again been thwarted by the Democratic-controlled Senate.  Nationwide, as many as 20,000 people, including Iowans, have been laid off in the biodiesel industry in large part because of the lapse in the biodiesel production tax credit.  Grassley offered an amendment to the small business bill that was being debated in the Senate.  Grassley’s amendment failed by a vote of 41-58.

“I was asked at nearly every meeting in Iowa about the ethanol and biodiesel tax credits, even at the Iowa-Iowa State game on Saturday.  People have seen family members lose their jobs because of delays by the majority party,” Grassley said.  “I have confidence that eventually the biodiesel tax incentive will be passed, but I hope it’s not too late for the thousands of people across the country who are already out of work because of the lapse.”

The biodiesel industry employed 23,000 people on January 1, 2010, including 2,000 Iowans.   It’s now operating at about 15 percent, according to the industry.

Grassley and Senator Maria Cantwell filed a bill in August 2009 that would have extended the biodiesel tax credit for five years.  The bill has never been acted on.  Since then, Grassley has pushed to extend the credit and tried twice to get unanimous consent to pass the credit, only to be objected to by Democrats.

Grassley’s amendment would have extended for one year (through December 31, 2010) the Sec. 40A income tax credit for biodiesel and renewable diesel.

Technically, that 41-58 Senate vote was on Grassley’s motion to suspend the rules today so that he could offer his amendment on the biofuels tax credit, not a vote on the amendment himself. But Grassley can still say truthfully that he tried to get the tax credit in the bill. Incidentally, it’s not accurate for Grassley to imply that Democrats alone voted against the biofuels industry. The roll call shows bipartisan coalitions for and against Grassley’s motion; Iowa’s Tom Harkin was among 16 Democrats who voted for it. There were also 15 Republicans who opposed Grassley’s motion.

Grassley joined all but two Senate Republicans in voting against cloture (ending debate) on the small business tax relief bill and then against the bill itself. The statement his office released later tried to walk a fine line, taking credit for what’s good in the bill while justifying his vote against it. Grassley said he supports many of the small business tax credits and included them in a bill he authored. However, he claimed he couldn’t support “another government spending program,” and characterized the $30 billion lending program for business as “a taxpayer-funded $30 billion bailout fund.”

I don’t think “I wrote the bill before I voted against it” is a very convincing message for Grassley. The bottom line is, he postures as a small business champion but voted against a bill containing many small business tax credits, all because of a business loan provision he doesn’t like. Is it really so bad to help more businesses access credit? Few businesses can expand without loans. Conlin’s campaign hammered Grassley on his Senate vote in a press release today:

“It is unbelievable that, in the midst of this Great Recession, Senator Grassley has voted against a plan to put money into the hands of Iowa’s small businesses.  As the Senator has recently pointed out, small businesses are responsible for the creation of most new jobs.  This bill would provide needed capital to these small businesses to help create the jobs Iowa and the nation so badly needs,” said Paulee Lipsman, spokesperson for the Roxanne Conlin campaign.

“Senator Grassley was willing to bail out Walls Street banks, with no strings attached.  Chuck Grassley has forgotten who he works for.”

The bill is paid for by closing tax loopholes.

In other news from the Senate race, a second Conlin television commercial started running on Wednesday:

My transcript:

Grandson: We want to tell you a few things about our grandma.

Granddaughter [wearing big red boxing gloves]: She’s a fighter who took on corporations and dishonest politicians.

Grandson: She’s taken on big banks and even big oil for polluting our drinking water. [Granddaughter spits water into sink in background.]

Granddaughter: She’ll hold Washington accountable

Grandson: by freezing Congressional pay until they balance the budget.

Granddaughter: She’ll tell it to you straight, even if it’s not popular.

Conlin: Guys, it’s time to do your homework.

I’m Roxanne Conlin, and I approved this message.

Granddaughter: Because she’s one tough grandma.

Earlier this week, Governor Chet Culver started running both a light-hearted positive ad featuring his children and a hard-hitting ad against Terry Branstad. Similarly, Conlin is running this spot while her first ad (pounding Grassley for supporting the Wall Street bailout) stays in rotation.

I am not sold on the cute kids in commercials strategy, but it’s good Conlin was able to run at least one ad showing her as a human being before Grassley was able to define her on television. I like that “www.RoxanneforIowa.com” is visible at the top of the screen throughout the ad.

The Grassley campaign responded to both commercials by calling Conlin a hypocrite:

“Both of the new Conlin ads speak volumes about her campaign – nothing but more hypocrisy,” he said.

Woolson said the ads claim Grassley wants to export jobs, but fail to mention that the senator got a 9-percent tax break for U.S. manufacturers. He also said Conlin claims to stand up to polluters, but invested in one of the companies responsible for the Gulf of Mexico oil spill.

“She rails against big banks but sells millions of dollars of tax credits to them through her real estate business,” he said. “And, she says she’s against the bank bailout but she got her own bailout through the federal stimulus program when she and her husband used $1.28 million in taxpayer dollars to pay off an apartment building they already owned.”

I sought a response from the Conlin campaign and got this comment from manager Mark Daley:

Senator Grassley voted to create the program Conlin Properties has worked with to add a billion dollars in income to thousands of Iowans over the past 25 years. I cannot believe a 52 year public servant would condone such reckless behavior and blatant distortions of the truth.  Senator Grassley is proving yet again that his only concern is his reelection and he will not let the truth stand in the way of that.

Final note: it looks like “the empty chair routine” is coming to Des Moines this Sunday. Grassley still hasn’t responded to Conlin’s invitation to debate at the downtown public library, the Conlin campaign announced today.

Any thoughts on the Senate race are welcome in this thread.