Senate Republican leader Mitch McConnell argues that increasing taxes on the nation’s top 2 percent would hurt small businesses. However, legislation enacted by Congress this year encourages job creation and gives tax breaks to small businesses.
In March, President Obama signed the HIRE Act to promote job creation. The Act exempts private-sector employers that hire workers who have been unemployed for at least 60 days from having to pay the employer’s 6.2 percent share of the Social Security payroll tax for the remainder of 2010. Additionally, businesses were eligible to receive a $1,000 tax credit in 2011 for retaining the worker on the payroll for a continuous 52 weeks.
Later this year in September, President Obama signed a “Small Business” bill, which included several tax breaks. Some of the tax breaks are:
— An immediate expense on capital investments. One provision increased to $500,000 the amount of investments that businesses would be allowed to write for 2010 and 2011, while raising the level of investments at which the write-off phases out to $2 million.
— Zero capital gains taxes on certain investments. Another provision bestows tax relief to more than 1 million small businesses eligible to receive capital gains breaks, and if the investments are held for five years or longer, the transactions could be completely excluded from capital gains taxation.
— Carry-back of general business credits. The bill provides a five-year offset of general business credits providing businesses with a tax break this year and also allowing credits to offset the alternative minimum tax, reducing taxes.
— Extension of the 50 percent bonus depreciation. The bill extends a 50 percent “bonus depreciation” through 2010, giving 2 million businesses, large and small, tax cuts this year by accelerating the rate at which they deduct capital expenditures.
— A deduction for health insurance for self-employed. More than 2 million will be able to deduct the cost of health insurance for themselves and their family members in calculating self-employment taxes.
The Bush-era tax cuts helped contribute to our ballooning deficit. David Stockman, a conservative Republican, who was director of the Office of Management and Budget under President Reagan, said he believes that Reagan would not have supported extending the Bush tax cuts of today. Stockman told National Public Radio this August that extending the tax cuts would be akin to a bankruptcy filing by Congress and the White House.
Let’s give the new legislation, which provides tax breaks and job incentives for “small businesses” time to work before blindly accepting McConnell’s argument that allowing the Bush-era tax cuts to expire would hurt small businesses. We must start closing the deficit gap.
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