The intensity of the debate is a testament to the place that small businesses hold in the culture as a symbol of American ingenuity. That reverence has grown stronger in recent decades, as the decline of large manufacturers has made the economy rely on start-ups and small businesses to create jobs and entire growth industries.

But the way the I.R.S. classifies small businesses is vastly different from the public perception of the neighborhood dry cleaner or the small tool-and-die shop. A report released by the Joint Tax Committee in July found that many of the tax returns categorized as small businesses were actually filed by wealthy taxpayers who earned business income through limited partnerships or S corporations to allow their firms to avoid paying corporate taxes.

The study found that in 2005, 19,000 of those small businesses had revenue of more than $50 million.

Democrats say they are trying to aim tax relief at the small businesses that most need it. On Thursday, they won Senate approval of a bill to offer $12 billion in tax breaks intended to encourage small-business investment and to create a $30 billion fund to encourage community banks to lend to modest-size companies. The measure is expected to pass the House and be signed into law by President Obama.

With an eye on the deficit, Mr. Obama has said that the country cannot afford the $700 billion it would cost to extend the tax breaks for the wealthiest Americans over the next decade. House Speaker Nancy Pelosi has said she supports Mr. Obama’s proposal, but it is unclear whether she has enough support in her caucus for the measure.

“The tax cuts at the high end have not produced any jobs; it only increased the deficit,” Ms. Pelosi, a California Democrat, said Thursday. “We’re still paying the price that they have contributed to the deficit all along.”

But Senator Charles E. Grassley, Republican of Iowa, warned that eliminating the tax cuts on top individuals would quash many businesses just as they started to grow.