The Agenda
How small-business issues are shaping politics and policy.
In his speech to the joint session of Congress on Thursday night, President Obama proposed a jobs bill, the American Jobs Act, with several specific, if not yet particularly detailed, tax initiatives that would benefit small businesses — though most in fact would bring the same relief to all companies, large or small. The initiatives can be sorted into two flavors, incentives to promote investment broadly and incentives to promote hiring in particular.
The following investment incentives would be in place for 2012.
Payroll tax cut for employers. The plan would halve the employer share of payroll taxes, to 3.1 percent, on the first $5 million in wages in 2012. While this tax cut would be available to all businesses, the White House said it would most benefit the 98 percent of companies with wages below $5 million. A company with a $5 million payroll would see a tax cut of $155,000.
Extending bonus depreciation through 2012. The plan would extend through 2012 a provision that permits companies to fully depreciate in the first year certain purchases that would normally be amortized over as much as 20 years. The provision was included in last year’s compromise legislation to extend the Bush tax cuts and unemployment insurance. Without any action, bonus depreciation in most cases would be limited to 50 percent in 2012 and then expire altogether.
The following hiring incentives would take effect in October 2011. It is unclear when, or if, they would expire.
Tax credits for hiring the long-term unemployed. Mr. Obama proposed a tax credit of up to $4,000 beginning in October 2011 for hiring a person who has been unemployed for at least six months. If the prospective employee is a veteran, the credit would increase to as much as $5,600. If the veteran became disabled in the course of serving, the credit would rise to as much as $9,600. According to a White House spokesperson, the amount of the credit would depend on the employee’s wages and the number of hours worked.
Employer payroll tax holiday on payroll growth. The president would eliminate the entire 6.2 percent payroll tax on any increase in payroll up to $50 million above the prior year. The growth in wages can be spent on either new hires or raises for existing employees.
All of these initiatives would require approval by Congress. In his speech, the president also mentioned other changes that the administration could undertake on its own. He promised that the government will pay its contractors more quickly, without specifying how quickly. (Federal law requires that the government pay contractors within 30 days of receiving an invoice. “Historically, agencies have been generally encouraged to pay contractors at or right before the 30-day deadline,” said Moira Mack, a spokeswoman for the White House Office of Management and Budget.)
Additionally, the White House said the president would ask the Securities and Exchange Commission to “to reduce the regulatory burdens on small-business capital formation in ways that are consistent with investor protection, including expanding ‘crowdfunding’ opportunities and increasing mini-offerings.”
Before the president had finished delivering his speech, the National Federation of Independent Business, the conservative-leaning small-business lobbying group, panned it as “more of the same” in an e-mailed statement. “Small businesses need the government out of their way,” said Dan Danner, the group’s president and chief executive, in the statement. “Tax breaks are always a welcome help to small businesses, especially in these tough economic times. But those outlined tonight by the president are temporary, and avoid the question of meaningful business tax reform.”
The president’s proposals did cheer at least one group of small-business executives — those invited by the president to witness the speech. Albert Green, chief executive of Kent Displays, a manufacturer of liquid crystal displays in Kent, Ohio, said that while he didn’t have time to study the proposals in detail, “the takeaway is that money for businesses always helps — it helps them grow.”
But even these business owners expressed reservations. David Catalano, who helped found Modea, a digital advertising agency in Blacksburg, Va., said that he was wary of the president’s pledge to pay for the package by having the “wealthiest Americans and biggest corporations to pay their fair share.” Mr. Catalano said that because his company was organized as an S Corporation, in which profits are passed through to shareholders, he would then face higher taxes. But, he said, “my partner and I have reinvested 100 percent of the profits that our agency has made over the last five years back into the company. If the government takes a bigger share of that from me, it directly impedes my ability to grow the agency.”
Darlene Miller, who owns and runs Permac Industries,a precision machining company in Burnsville, Minn., said she also worried about the president’s call for higher taxes but added that even with her company’s profits, “I’m not the wealthiest, so it does not affect me directly.” She said the president could have done more to address regulatory burdens. “There’s still a lot of work in that area to be done,” she said. “There are a lot of regulations that really just aren’t necessary.”
Both Ms. Miller and Mr. Catalano said they were looking for employees right now and acknowledged that President Obama’s proposed hiring incentives would not influence their decisions, reinforcing a concern among economists that such inducements don’t encourage new hiring but reward actions that would be taken anyway. But both echoed Mr. Green’s view that every little bit helps. “You don’t hire somebody because you’re getting a tax credit,” said Mr. Catalano. “This just eases the burden, to invest in their education, or do more things for them.”
Article source: http://feeds.nytimes.com/click.phdo?i=29c64824013e85280268e0d85641ba23