Small business tax cuts `complement' Bush plan
Atlanta Business Chronicle - by Kent Hoover Special To Atlanta Business Chronicle
Small businesses hope the fact that they create most of America's new jobs will carry some weight when Congress decides what will be included in a tax cut package this year.
While they expect to benefit from President Bush's proposed across-the-board reduction of tax rates, small businesses also want Congress to pass a series of tax measures aimed specifically at them.
Sen. Christopher S. "Kit" Bond, R-Mo., introduced a package of small-business tax breaks (S. 189) that he said are "designed to complement" Bush's "broad-based tax stimulus package."
"With an economy that appears to be slowing, small businesses are likely to be among the first affected," said Bond, who is chairman of the Senate Small Business Committee. "We need to ensure that they benefit from any tax stimulus we enact this year."
Bond's bill:
• Provides the self-employed with immediate 100 percent deductibility for health insurance costs, instead of phasing it up over the next four years;
• Phases out the individual alternative minimum tax (AMT), a law that raises the tax liability for a growing number of sole proprietors, partners and S corporation shareholders;
• Exempts corporations with less than $7.5 million in gross receipts from the corporate AMT, up from the current $5 million exemption.
• Repeals the 0.2 percent surtax on unemployment taxes, which businesses have been paying since 1976;
• Raises the deduction for business meals from 50 percent to 80 percent; and
• Makes the research and experimentation tax credit permanent.
The legislation also includes several tax simplification measures that small businesses have been lobbying for. The bill:
• Allows small businesses with less than $5 million in annual gross receipts to use the cash method of accounting instead of the more complicated accrual method;
• Increases to $50,000 the amount of equipment that can be expensed each year, thus allowing more small businesses to avoid complex depreciation rules;
• Lowers the depreciation period for computer equipment and software to two years;
• Raises the full depreciation threshold for business vehicles to $25,000;
• Allows individuals to avoid interest penalties for underpayments of estimated taxes if their estimated taxes equal 90 percent of the current year's tax bill or 100 percent of the previous year's tax bill; and
• Permits married couples who jointly own a small business to opt out of complex partnership reporting requirements and file as sole proprietorships.
Bond's bill reads like a wish list for small businesses, and plenty of other interest groups are lobbying to include their tax breaks in any tax cut package.
"No, the train can't carry all the cars everybody's lining up," said Dan Blankenburg, a House tax lobbyist with the National Federation of Independent Business.
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