OPINION: Congress Finally Gets It Right. With A Little Help From Our Friend, Senator Ayotte
Small business owners deal with
a great amount of uncertainty in the day to day operation of their company. To
get into business in the first place, a person must be willing to tolerate a
good deal of risk. But even the most confident owner has their limits and
Congress has been pushing them for years now, wreaking havoc on expense
planning. Now, Congress has finally fixed something that has been a perennial
mess.
Years ago, Congress raised
limits for the amount of new property businesses can expense in a given year
from $25,000 to $500,000. This radically simplified the process of tax
expensing. For instance, under old rules businesses were required to keep
paperwork for up to 39 years. The expanded provision reduced that to a single
year.
Expanded small business
expensing certainly helps boost growth. It encourages purchases of new heavy
machinery, office equipment, computer technology and many other big-ticket
items. Small businesses are both purchasers of equipment and sellers so it
benefits almost anyone engaged in commerce. It’s one of the top priorities for
the National Federation of Independent Business (NFIB).
NFIB member Sherry Wuebben
sells farm equipment. This type of equipment is a big investment, but a new
machine can make a big impact on a business’s bottomline. “Heavy machinery for
farming or any other industry is increasingly sophisticated in terms of the
technology and that’s terribly important for small businesses because it allows
them to operate more efficiently,” said Wuebben.
So small business expensing
works in promoting economic growth, but there’s a problem. It only works if
businesses can count on it being there when they need it. In recent years,
Congress has waited until late in the year to renew small business expensing.
Small businesses typically
operate on narrow margins and, without the tax provision, an owner simply can’t
afford to make the purchase. Last year, Congress waited until mid-December and
then only retroactively passed the provision for the year. Since the business owner
has to be able to prove that the equipment has been put into service, this made
it impossible for some businesses to purchase something in time.
Making this provision permanent
will end that uncertainty forever. It will mean real and permanent benefits for
small businesses and the economy. NFIB economic research shows that certainty
about the provision could fuel the creation of nearly 200,000 jobs in the first
ten years. During that same time, economic output may increase by $18.6
billion.
Small business owners have been
vocal about the need for a permanent benefit. Thousands of them have sent more
than 10,000 letters to their Senators and Representatives. Many traveled to
Washington, D.C. to make an appeal in person but Senator Ayotte listened when her
constituents spoke out.
After years of effort, Congress
finally included a permanent provision in the latest tax extenders bill. Not
only is the limit $500,000 for this year, but it is also tied to the rate of
inflation. This bill, with the steadfast support of Senator Ayotte, passed both
chambers with bipartisan support and was signed by the President.
This is a huge boon for small
businesses. Now, they don’t need to call their Congressperson and ask when the
annual tax bill is going to finally be passed. Small business will no longer
get caught up in the annual wrangling over government funding.
Washington still subjects small
business owners to lots of uncertainty when it comes to tax and regulations.
These subjects consistently rank as one of the top problems when NFIB asks our
members what worries them.
However, thanks to Senator
Ayotte, we have a solid step in the right direction. At least this time,
Congress and the President did something that clearly makes it easier to run a
small business. Buying major equipment is now much less of a gamble. It’s a
welcome holiday present for millions of struggling small businesses.
Bruce Berke is the New
Hampshire State Director for the National Federation of Independent Business
