American entrepreneurs and small business owners continue to grow their businesses and create jobs due to an unprecedented level of tax breaks that have been signed into law over the past several years. This includes billions of dollars in US tax relief that have been signed into laws such as the US Recovery Act, the Small Business Jobs Act, the HIRE Act, the Affordable Health Care Act, and the Tax Relief and Job Creation Act.
President Obama has recently proposed a small business tax credit tied to hiring new employees. Under Obama’s proposal, you would receive a 10% tax credit for small businesses that hire or give raises in 2012. For example, a small business that increased its payroll by $5 million would see a $500,000 income tax credit.
According to the White House, the measure would address the need to invest in small businesses and jumpstart new hiring and entrepreneurship. The tax break would be limited to $500,000 to make it more valuable to small business. Unlike the GOP bill that would allow small businesses with fewer than 500 employees to deduct 20 percent of their income in 2012. Although the tax deduction in the GOP bill is limited to half of the cash wages paid to employees. The Tax Policy Center estimates that half of the benefit of the small business tax cut proposed by the Republicans would go to the wealthy people earning more than $1 million. The House Republicans have countered by arguing that their bill puts more money back into the hands of small businesses so they can reinvest those funds to accelerate the growth of their business and create more jobs. This claim has been disputed by a non-partisan think tank on small business taxation, but it’s not clear that Obama’s proposal would add many jobs either — it could simply benefit businesses that planned to hire anyway. Nor is it clear that Obama’s proposal will be supported by many Republicans in the Congress and may be dead on arrival.
Obama also plans to propose extending through 2012 one of the incentives on the N.F.I.B.’s agenda: the 100% bonus depreciation for 2011 that was signed into law as part of the deal to extend the Bush tax cuts. Bonus depreciation is broadly popular, and this part of the president’s proposal may have a better chance of becoming law.
Entrepreneurs and small business owners are welcome to join the conversation on Tradeseam to help jumpstart entrepreneurship and hiring that will contribute towards the global economic recovery for a better future for all.