Tag Archive for 'tax policy'

Navigating the uncertainty of small business taxes for 2011

Several months ago, I wrote an article that was titled, “The enemy of jobs creation is uncertainty.” In the article I identified several issues that were causing small business owners to be reluctant to invest or hire.  One of those things was - and still is - not knowing what the income tax burden will be in the future.  Today, there are several tax issues unresolved that will impact virtually every small business.

1.  The personal tax rate, the corporate tax rate and the capital gains tax rate: We still don’t know what Congress will do with the tax cuts from 2001-03, often called the “Bush tax cuts,” which are set to expire at the end of 2010.  Not knowing the tax implications creates frustration when trying to project profit margins or do retirement planning.  And if we have any assets that we might want to sell in the short-term, we feel pressure to sell them this year, since the cap gains rate may go up next year.

2.  The health care bill:  No one really knows how this new program will impact small businesses, both organizationally, financially or from a compliance standpoint.  Speaking of compliance, one of the big concerns involves the proposed 1099 reporting requirements that is an element of the health care bill. Every small business advocacy organization I’ve talked with in the past few months has said this new compliance requirement will be a nightmare for small businesses.

Recently, we polled visitors to my website about what the government should do with the expiring tax cuts. Over 80% of our respondents said the tax cuts should be extended.  If the government wants to get the economy going quicker, they will do everything they can to help small businesses understand what their future tax compliance requirements are as soon as possible.

Recently, on my radio program, The Small Business Advocate Show., I talked with small business tax expert, Barbara Weltman, about why current tax policies are creating a great deal of uncertainty among small businesses, including the new 1099 reporting provision. Barbara Weltman, is a tax attorney and author of many books on small business tax planning, including the J.K. Lasser series. I hope you will take a few minutes to listen to what Barbara has to say, and be sure to leave your comments. Listen Live! Download, Too!

Don’t call it small business economic stimulus if it’s really just more pork

So, we have a new Congress and administration who are tasked with strengthening our financial system and economy which, on many fronts, is in dire straights. With that in mind, the new House of Representatives delivered to the Senate for their consideration an $818 billion bill that is its answer to economic stimulus, called the “American Recovery and Re-investment Act.” It doesn’t take long, nor a degree in economics, to see that this bill could never be mistaken for a stimulus package and, sadly, is nothing but a pork-barrel spending spree. With interest, it’s generally accepted that this bill will reach $1.3 TRILLION - that’s right, with a “T.”

Wouldn’t a reasonable person think that a stimulus package would be front-loaded to have its intended effect in 2009 and 2010? But according to a Congressional report, only $26 billion would be spent in 2009 and $110 billion in 2010. That’s less than 17% in the first two years. Some of the money in this bill would be spent as late as 2019. Shouldn’t a stimulus bill be designed with a greater sense of urgency?

And wouldn’t that same reasonable person think the goal would be to actually stimulate the economy by encouraging employers to keep their employees and create new jobs? So, what does the bill provide for the largest job creation sector in the economy, small businesses? Primarily an extension of existing tax deductions, like the ability to expense up to $250,000 of capital items in one year instead of depreciating them over time. Plus, less than a handful of other tax provisions, none of which will free up the credit market or encourage a business to hire or at least not lay off. That’s it for small business - more of what we already had.

But there is $550 billion in NEW spending (a/k/a Pork) and $90 billion for infrastructure, most of which won’t hit the economy in the next 12 months. Then there’s $87 billion for Medicaid and $79 billion for schools, just to name a few. Now, reasonable people can disagree about whether this money should be spent on these things, but no reasonable person could argue that this money will stimulate the economy very much, and certainly not in the next critical 12-18 months.

At this time, the bill is in the Senate where it will be modified to produce that body’s version. Then it will go to the Conference Committee for final editing before going to the President. Let’s hope that somewhere along the way those who understand the difference between pork and stimulus will prevail and the new bill will have more of the latter and less of the former. Otherwise, we’ll be better off with no bill.

Recently, on my small business radio program, The Small Business Advocate Show, I discussed this issue with several public policy experts who are members of my Brain Trust, including Ray Keating, Chief Economist for the Small Business and Entrepreneurship Council (sbecouncil.org); Giovanni Coratolo, Director of Small Business Policy at the U.S. Chamber of Commerce(uschamber.com); and Rich Galen, creator of the cyber-column, Mullings.com and political strategist (Republican). Here are the links to each of those interviews. Don’t miss what these smart men have to say. Also below is a link to my individual thoughts on the so-called economic stimulus package.
For Ray Keating:
For Giovanni Coratolo:
For Rich Galen:
For Jim Blasingame:

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