Small Business Tax Cuts–Direct from Whitehouse.gov
The President and his minions continue to extol the eighteen times that taxes have been cut for small businesses.
To begin with, small business taxes have NOT been cut 18 times. But that sounds much better in a political message. Rather, there have been 18 different small business tax cuts (credits). Most, if not all, of these cuts/credits are irrelevant to the majority of small businesses, which is why their impact has been minimal. They are in direct opposition to the new cash flow requirements enforced by bank regulators as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In Regulators Gone Wild and Over-Regulation is Destroying our Community Banks, I give personal examples of how those regulations literally prevent me from hiring additional people and force me to minimize all spending. As explained therein, to hire additional needed employees or spend money on projects that I want to complete would put my loan renewals in jeopardy. I am literally forced to remain on the sidelines. The tax cuts/credits are intended to encourage spending at a time when the Dodd-Frank Act makes that spending economic suicide.
From the Recovery Act, HIRE Acts, and Affordable Care Act:
1. A New Small Business Health Care Tax Credit
2. A New Tax Credit for Hiring Unemployed Workers
3. Bonus Depreciation Tax Incentives to Support New Investment
4. 75% Exclusion of Small Business Capital Gains
5. Expansion of Limits on Small Business Expensing
6. Five-Year Carryback of Net Operating Losses
7. Reduction of the Built-In Gains Holding Period for Small Businesses from 10 to 7 Years to Allow Small Business Greater Flexibility in Their Investments
8. Temporary Small Business Estimated Tax Payment Relief to Allow Small Businesses to Keep Needed Cash on Hand
From the Small Business Jobs Act:
9. Zero Capital Gains Taxes on Key Investments in Small Businesses
10. The Highest Small Business Expensing Limit Ever– Up to $500,000
11. An Extension of 50% Bonus Depreciation
12. A New Deduction for Health Care Expenses for the Self-Employed
13. Tax Relief and Simplification for Cell Phone Deductions
14. An Increase in The Deduction for Entrepreneurs’ Start-Up Expenses
15. A Five-Year Carryback Of General Business Credits
16. Limitations on Penalties for Errors in Tax Reporting That Disproportionately Affect Small Business
And from the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act:
17. 100 Percent Expensing
Undoubtedly these tax credits can each be quite helpful—IF you have a small business that is not dependent upon getting existing loans renewed and/or has great cash flow. In other words, if your business doesn’t really need help, the government is right there with some additional perks. But, if your business is like most and is subject to renewable loans, the only way to get those loans renewed is (courtesy of the Dodd-Frank Act) to absolutely minimize spending and investment so that the cash flow to expense ratio remains high and you pass the scrutiny of the many new bank regulators. For most small business owners these tax credits are meaningless. We are more than willing to continue with projects that are truly “shovel ready” but we can’t do that without jeopardizing our current loans and hence our business.
***Gary A. Howie MSc, PhD*** is a business owner/rancher
