White House Offers Small Businesses Tax
Relief for Hiring Despite Group’s Opposition
By Heather M. Rothman

A $48 billion package of small business tax proposals released Jan. 31 by President Obama reflects ideas recommended by entrepreneurs and small business owners around the country, White House officials said while urging Congress to pass the measures.

The tax proposals are part of a greater Startup America Legislative Agenda that also includes measures to unlock capital for startup businesses.

But small businesses are not clamoring for that type of measure, Chris Walters, legislative affairs manager at the National Federation of Independent Business, told Bloomberg BNA.  “We haven’t been pushing this credit on the Hill and we’re skeptical it would create jobs,” he said, adding that tax credits for hiring are not a proven tool. Businesses create jobs if the business is doing well and customers are walking in the door, not because the federal government provides a tax credit, he said.

According to a revenue estimate offered by Director of the National Economic Council Gene Sperling, two-thirds of the package, or $32.7 billion, would be used on a new tax credit that would provide small businesses with a 10 percent income tax credit through either hiring new employees or increasing wages during 2012.

That one-time provision, he said, would be worth up to $500,000 and would help up to 2 million small businesses.

Obama Open to Additional Ideas

Sperling said a provision making permanent a now-expired 100 percent exclusion for capital gains from the sale of certain small business stock would carries a 10-year cost of $8 billion, while another extending 100 percent bonus depreciation on qualified property through 2012 would cost $4.1 billion.

Finally, a provision to make permanent a doubling from $5,000 to $10,000 of the tax cut for startup business expenses would cost $3.1 billion over 10 years.  “Our [package] reflects the president’s priorities and what the president believes would be the most sensible and strong small business and startup legislative package,” Sperling told reporters. “But we also recognize that no one has all the good ideas and what the president is really encouraging … is an acceleration of the effort to put forward a strong bipartisan package that can be passed in both houses and sent to him.”

Walters said the small business community would like Congress to make permanent the tax code Section 179 expensing provisions. The limit for full expensing in 2011 was $500,000, but that amount dropped to $125,000 (adjusted for inflation) for 2012 and could slide to $25,000 in 2013 absent congressional action. He said keeping the deduction limits as high as possible and reinstating and making permanent allowing real property changes to qualify for the deduction are priorities for small business owners.

Finding the Offsets

Sperling noted that Obama’s fiscal year 2012 budget proposal included more than $300 billion in potential offsets and said the fiscal 2013 budget set to be released Feb. 13 would include similar offsets, which he said could be found by “closing loopholes” in the Internal Revenue Code.

“There’s more than enough specific proposals to pay for this in a deficit-neutral way,” Sperling said. “We would clearly work together with Democrats and Republicans in both houses to find an offset package that would be acceptable to the president and the relevant members of Congress as well.”

Speaking before a cabinet meeting, Obama said it is his “expectation and hope” that Congress will put together a package quickly. “I will sign it right away, and I would like to see that bill signed this year,” he said.