By Mike Griffith, Staff Writer
Less than two weeks ago President Obama announced some sound, prudent steps to help small businesses, but this news was largely overlooked because it came just as the AIG bonus scandal hit the airwaves. The substantial small-business tax breaks that the Obama White House outlined are not only encouraging, but they show that the president does understand that reducing the tax burden spurs economic growth. As of now, these tax breaks are only in effect for the current tax year, but they’re still very good news for small business owners, and they will surely help the economy.
Under orders from President Obama, Treasury Secretary Geithner has ordered the Internal Revenue Service to issue a series of new rules for temporary but significant tax breaks for small businesses, namely, small businesses:
– That earn up to $15 million will be allowed to claim losses for the past five years in the current tax year
– May write off up to $250,000 in investments this year
– Can reduce estimated tax payments to 90 percent of the previous year’s filing
– Are allowed to take larger depreciation deductions within the first year of property purchases
– And will see 75 percent of capital gains excluded for those who invest in small businesses.
The administration plan includes $730 million from the stimulus package to immediately reduce small-business lending fees and to increase the government guarantee on some Small Business Administration loans to 90 percent. (“Obama Offers Plan to Help Small Businesses,” AP News, March 16, 2009)
In addition, President Obama is taking steps to reduce lending fees for small business loans, increase federal guarantees for small business loans, in addition to cutting the tax burden for small businesses:
The White House announced a series of moves to get credit flowing to small businesses. The measures include boosting bank liquidity with up to $15 billion aimed at unfreezing the secondary credit market, reducing lending fees and increasing loan guarantees, and easing the tax burden. (“Obama Offers Plan to Help Small Businesses,” AP News, March 16, 2009)
Now these are some solid, wise steps. Why doesn’t President Obama make them longer in duration, if not permanent? Clearly, these steps show he understands that tax cuts stimulate growth, and he deserves due credit for taking them. But, hey, why not make these steps last a lot longer, like at least for several years and then gradually phase them out or better yet just reduce them a bit?
In any case, these steps to help small businesses are good news. The bad news is that these moves, commendable as they are, may be cancelled out by the excessive (some would say reckless) spending that President Obama is proposing. You’d think we would have learned from the Bush years that you can’t cut taxes and go on a giant spending spree at the same time if you hope to balance the budget and to keep the government from being too much of a drag on the economy. Bush was one of the biggest spenders in history, but President Obama is already on track to outspend Bush by leaps and bounds. In just sixty days, between the stimulus bill and the omnibus spending bill, he has already more than tripled the budget deficit. Much of that spending, especially the bailout money, was unnecessary and wasteful. Let’s hope President Obama changes course and decides to keep his campaign promise to give us a net reduction in federal spending.
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