As the days wind down to President-elect Barack Obama’s inauguration, lawmakers and lobbyists on Capitol Hill are getting wound up over the new administration’s proposed economic stimulus plan.
As every Gucci Gulch lobbyist knows, the president proposes, but Congress disposes. That old political saw means that no matter what Obama puts into his stimulus plan, Congress will ultimately decide what makes it into law.
Needless to say, lobbyists of all stripes aren’t waiting for the president’s plan to land on congressional desks. As much as Obama has talked about a bipartisan effort and the need to minimize the pork, the looming debate will be anything but bipartisan and pork will be on every menu.
Fortunately, several key lawmakers on Capitol Hill realize that Main Street must be a critical part of any stimulus plan. Small businesses traditionally have led the nation out of recessions, and this recovery, like others, will only begin when the nation starts generating more jobs than it loses — a role for which the nation’s entrepreneurs are particularly well suited.
At last count, lawmakers and small business groups have floated more than half a dozen proposals to get Main Street into the game. The president-elect also is considering proposals targeting small firms in his $300 billion business tax cut plan. So here’s a scorecard of key measures that could be on the table as the president and Congress get down to business over the next several weeks.
The president-elect is said to support an extension, from three years to five years, of the so-called “carry-back” provision in the tax code. That would allow firms that suffer net business losses this year to deduct those losses from tax returns going back up to five years. If the business paid taxes in those years, it would be eligible for a refund.
Sen. Olympia J. Snowe, R-Maine, the ranking member of the Senate small business committee and Sens. John Kerry, D-Mass., and Mary Landrieu ,D-La., the outgoing and incoming chairpersons respectively, have already introduced the Small Business Act of 2009, which includes the carry-back proposal.
The Obama stimulus package could also include a one-year tax credit for creating jobs. The president-elect has pledged to create 3 million new jobs to offset 2008’s steep losses. Small businesses would clearly benefit from that. The president-elect is also said to be leaning toward an extension of Section 179 expensing.
Last year, Congress passed and the president signed into law the Economic Stimulus Act of 2008, which allowed small businesses to expense up to $250,000 in investments, including new equipment purchases, through 2009. The Snowe-Kerry initiative would extend the Section 179 expensing for another year, and both would like to make it permanent.
They are also calling for an additional $1.5 billion for the New Markets Tax Credit (NMTC) allocation, retroactive for 2008. The proposal would provide an infusion of capital in low-income and rural communities by encouraging private capital investment.
The National Federation of Independent Businesses (NFIB) is pushing a proposal to declare a six-month “holiday” on payroll taxes for businesses and their employees. The measure would amount to as much as a 6.2 percent break on taxes paid to the government.
A business with 10 employees who make an average of $40,000 each could reap $2,070 per month in savings for the firm, according to the group. The holiday would apply to all businesses no matter their size and could cost as much as $312 billion, according to some estimates. The group says its lobbying team has made some inroads in the House, but no measure has been proposed so far in the Senate.
The National Small Business Association (NSBA) says that House and Senate leaders are looking at several familiar tax measures. They include allowing states to issue tax exempt bonds for infrastructure projects, an extension of research and development tax credits, an extension of state and local property tax deductions, and measures to eliminate the marriage penalty.
The group is also calling for the expansion of Small Business Administration lending, the elimination of borrower and lender fees for 7(a) and 504 programs, and an increase in government guarantees.
Banks that receive any future Troubled Assets Relief Program (TARP) funds (part of the U.S. “$700 billion bailout plan”) should also have to dedicate at least 25 percent of those funds to expand their small business lending and $3 billion of TARP funds should be used to purchase 7(a) pooled securities, which already are guaranteed by the federal government, the group says.
The NSBA also wants 23 percent of all funds for state and local infrastructure projects earmarked for small businesses, along with the repeal of the 3 percent withholding requirement. The group is also calling for the long-overdue repeal of the self-employment tax on health insurance for sole proprietors.
The U.S. Chamber of Commerce is calling for a tax break for businesses that repurchase debt, arguing that cutting debt is a good thing to do at this point. The Chamber is less enthusiastic about tax credits for retaining jobs or hiring new workers largely because of their potential administrative complexity.
The Chamber would also like to see more help for small and midsized exporters, which currently account for 30 percent of all U.S. goods and services sold overseas. It wants the government to double federal expenditures on export promotions, specifically focusing on small companies. As the dollar gains strength against other currencies, making U.S. products more expensive overseas, such help could be even more important in the months ahead.
This week lawmakers reconvened for the 111th Congress, and as another old political saying goes, no man or his property is safe as long as the legislature is in session. That means small businesses will need to make their voices heard once the backroom wheeling and dealing begins in earnest. The last thing they need is to be left on the outside looking in — again.