The Small Business Jobs Act passed recently by the U.S. has been hailed by some lawmakers as creating 500,000 jobs.
So What Exactly is in That Bill?
According to The Street, it “creates a $30 billion fund to provide small banks access to capital earmarked for small-business lending. Proponents of the bill say this pool of capital, coupled with government guarantees, will ease the credit crunch lenders have held to since the onset of the recession and could eventually leverage up to $300 billion in additional lending. Also included are roughly $12 billion in tax breaks and incentives.”
With all those billions being bandied about, it sounds pretty impressive, right? However, the response by some business owners I’ve talked with has been guarded. There are positives in the bill, in my opinion – and we’ll get to those in a minute. But there are two pieces of feedback I’ve heard from business owners:
- The bill didn’t go far enough to create a business-friendly climate.
- The title of the bill mentioning jobs is hype.
You see, entrepreneurs and business owners know that businesses create jobs. Unless you are talking about jobs working for the government, government can’t actually create jobs. Government can only create the conditions that make it easier or harder for businesses to create jobs.
What government has the power to do is create a business-friendly or –unfriendly environment. Business owners and entrepreneurs are more likely to say “lawmakers, don’t try to ‘help’ us – just keep obstacles out of our way.”
Good Points about This Bill
Despite the emphasis on something (creating jobs) that doesn’t ring true to the entrepreneurial mindset, this bill has some positive provisions in it. We business owners are, if nothing else, pragmatic. Our pragmatism tells us we owe it to our businesses and the employees who depend on us for their livelihoods, to take advantage of the positive provisions. There are a number of good provisions I urge you to take advantage of if they fit your business circumstances. The bill:
- Incentivizes investors by giving 100 percent exclusion from capital gains taxes on small business investments.
- Reduces the tax burden for small businesses by allowing them to carry back general business tax credits to offset their tax burdens from the previous five years. Small businesses will also be able to count the general business credits against the Alternative Minimum Tax (AMT), freeing up capital for expansion and job growth.
- Increases Section 179 expensing – permitting up to $500,000 in capital investments that businesses can expense.
- Extends Bonus Depreciation – allowing taxpayers to immediately write off 50 percent of the cost of new equipment.
- Increases to $10,000 the tax deduction for start-up expenditures – doubling the current levels.
What Didn’t Make it Into the Bill
Some groups advocated for other provisions that didn’t make it into the bill – for instance, some wanted a payroll tax holiday. But in the end, a payroll tax holiday, while an appealing idea, is still just a temporary measure. So it has been hard for me to get too excited about a temporary measure.
Another provision that didn’t make it into the final bill was a repeal of a recently-passed law expanding the requirement to file 1099 tax forms for all vendor purchases over $600. As the NFIB (National Federation of Independent Businesses) notes:
“The Small Business Jobs Act should have been a vehicle to pass meaningful reform for every small business in this country. Instead politics trumped helping small business, and senators failed to pass the Johanns amendment which would have fully repealed the onerous new 1099 reporting requirement included in the healthcare law. This bipartisan amendment represented a real chance for senators to fix a costly and burdensome paperwork requirement that lawmakers on both sides of the aisle agree must be repealed, and it’s disappointing that this amendment is not part of the bill passed today.”
The expansion of the 1099 filing requirement was passed as a tagalong provision in the healthcare bill (although it has nothing to do with healthcare and was unnecessary to healthcare reform). It is an ill-conceived requirement that increases the paperwork burdens for businesses, especially for small businesses, because it’s small businesses that regulatory burdens hit hardest. The more paperwork we are required to file, the more expensive it becomes to do business, and the less able businesses are to pay employees. Congress would be wise to repeal that law.
Yes, But How Should Business Owners Feel About this Bill?
In the end, you have to make your own judgment about this bill. But here’s what I suggest: be pragmatic. Appreciate the good points in this bill and figure out how to take advantage of them when this finally becomes law. Don’t let the hype about “creating jobs” make you cynical. And keep advocating for additional legislation to make the environment in which we do business a friendly one to small business.
Submit your question for Karen Mills, Administrator of the Small Business Administration, at openforum.com/whitehouse.