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Friday, January 30, 2009

Will the House-Passed Stimulus Help Small Business?

The big rush is underway to push through the “economic stimulus” package. The U.S. House advanced their version of the bill yesterday, and without one Republican vote. Just about every single politician supporting the bill can’t say for sure whether it will help the economy or not. If that is the case, then why are they risking nearly $900 billion ($1.5 trillion with interest) of our tax dollars on a massive spending measure that may not work?

For small business owners, the tax items in the House bill are generally worthless.
Yes, small business owners who have cash-on-hand may benefit from the extension of Section 179 expensing (if they decide to make an investment). But for many small business owners who are lucky to have discretionary cash and capital, uncertainty in the economy as well as where Congress will take tax and health care policy this year and next has them hanging onto every penny of profit. Of course, for those small business owners who struggle daily to get by (what cash flow?) – the tax measures mean very little.

SBA loans may get a recession make over, but from what I have read about program changes (and given the outlook for the economy) my guess is that these modifications will only marginally help small businesses.

There’s a lot of spending in this bill and it appears that a big chunk of it is directed to the states to cover their losses (another bailout for bad planning and decision-making), and to support existing federal programs. Yes, $188 billion in new construction/project money has been included, but unfortunately two conditions in this gigantic bill – the prevailing wage requirement (Davis-Bacon) as well as the E-verify mandate -- mean that small businesses will be put at a competitive disadvantage when bidding on these federal projects.

While the Senate package is shaping up to be even bigger that the House bill (and more bipartisan, I might add), some of the tax measures under consideration seem to be more beneficial for small businesses (an AMT fix, etc.).

If Congress took more time to get additional input on the package, they would find out what the true source of pain is for small firms and address those accordingly. Payroll tax relief would certainly help small business owners and their employees. Such a move would put more resources in both of their emptying pockets. Making some of the current tax relief measures permanent (like personal income tax rates, the research and development tax credit and capital gains taxes) would allow for entrepreneurs to plan “long-term” rather than worrying about what financial tools and resources they will have at their disposal in the future. And, giving self-employed people tax parity with larger companies in deducting health insurance is a long overdue move, and certainly needed right now.

It’s important that Washington act boldly to get our economy back on track. But it’s more important that they do the right thing at this critical moment.

Karen Kerrigan, President & CEO

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