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Saturday, July 31, 2010

Helping Small Businesses

Congress have a variety of bills it has been working on that are supposed to help small businesses. These include:
  • H.R. 4849, the Small Business and Infrastructure Jobs Tax Act - it passed in the House in March and is similar with respect to tax provisions to H.R. 5297
  • H.R. 5297, the Small Business Jobs and Credit Act - it passed in the House on June 17. It includes some lending provisions as well as tax provisions such as increasing the expensing amount for start-up expenditures and increasing the gain exclusion for Qualified Small Business Stock under Section 1202
  • H.R. 5486 - there was debate on June 15 and postponement
  • H.R. 5893, the Investing in American Jobs and Closing Tax Loopholes Act - there was debate in the House on July 29 and hearings were postponed

There is concern over whether these bills really help. The Small Business and Entrepreneurship Council issued a letter to the Senate (7/28/10) saying that H.R. 5297 misses the mark in helping small businesses. They also note that small businesses need relief from continued regulation of them. Per the Council - "Legislative measures that will help small businesses includes tax relief in the form of making existing rates permanent, a time-out on various legislative initiatives and regulatory efforts that will drive their costs higher, and an end to excessive spending that is adding to our debt and eroding economic stability."

An article in the Washington Post - "Republicans block small business lending bill," 7/29/10 describes some of the problems in getting any bills passed with lending relief and tax breaks for small businesses.

My questions:

  • What is the best stimulus and relief for small businesses? Congress has already tried a few measures such as increased expensing election, a payroll tax exemption for hiring new employees. Perhaps they need customers to get a stimulus so they will buy goods and services from small businesses.
  • How did Congress select some of these measures? Is a larger start-up expenditure deduction really needed? I'd guess that a new business would not likely make a significant profit in its first year so why push more expenditures into that first year could instead be amortized over the first 15 years? Look for something of greater impact. Perhaps a refundable credit for starting a business?
  • Why so many bills? Can't Congress just start with one and modify it during debate? It is confusing to the public in knowing what to provide input to Congress on.

What do you think will stimulate small businesses and do you think stimulus directed that way is what is needed? How might it be done without further complicating the tax law?

1 comment:

Mike Mazarick said...

So, the numbers have just come out, and it looks like we continue to be in a world of pain. The recession is not over and it is not about to be over until people can feel secure about jobs.

The smart money in Washington knows that in order to take care of the housing/mortgage situation there have to be more jobs created from somewhere. Experience has shown that two thirds of the new jobs will come out of small business, but small business is also really under the gun and can’t get a loan from the bank to create the new jobs necessary to get our economy moving.

What type of jobs will be created and continue into the future? In America, the only thing we do better than the rest of the world is to provide new and innovative products. Hitting the market window allows us to have a higher margin and beat the international competition every time. The Italians have more style, the Germans have better engineering, the English have a more well tuned bureaucracy, the product will always be cheaper when made in China, Japan, or India. The only thing the Americans do better than anyone else is ship things on time.

Where will the new jobs in America be created? New jobs will be create which help innovative small businesses ship their product on time.

-Mike Mazarick