Senator Harry Reid (D-NV) made this comment on the Republican blockage of the Small Business Jobs and Relief Act:
“The legislation Republicans blocked was a common-sense proposal that provided small businesses with two tax cuts designed to create jobs. Under our proposal, small businesses would have received a 10 percent tax cut on the amount by which they increase their payrolls this calendar year. And to help them expand, small businesses would have been allowed to write off 100 percent of the cost of any major equipment or software they purchase.
“Unfortunately, Republicans played their usual games of obstruction and opposition. There was simply no reason to oppose this bill on the merits, so Republicans manufactured reasons to kill it out of thin air. Republicans claimed they wanted amendment votes, but refused to take ‘yes’ for an answer when I offered them votes on those very amendments.”
The bill was designed to help truly small businesses, those under the $500K cap to hire employees and purchase business assets and equipment.*
And, the Republicans successfully filibustered the bill. The motion to invoke cloture on S. 2237 went down on a 53-44 vote. [roll call 177]
This is what the Senate GOP rejected:
“Small Business Jobs and Tax Relief Act – Amends the Internal Revenue Code to allow certain employers a tax credit for 10% of the excess (if any) of: (1) the wages and compensation paid to their employees in 2012; over (2) the amount of such wages paid in 2011, up to a maximum amount of $5 million. Extends for one year the 100% bonus depreciation allowance for business assets. Increases the amount of alternative minimum tax (AMT) credits that corporate taxpayers may elect to accelerate in a taxable year in lieu of claiming bonus depreciation.” [CRS]
Thus, if a business hired more employees in 2012 than they had in 2011 they’d be eligible for a 10% tax credit for the wages and compensation paid; AND, any business asset purchased could be written off in a single year.
A person doesn’t need to be an accountant to figure out that the last part is an exceptionally good deal. Every computer, filing cabinet, vehicle, any economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value, [Def] can be “written off.”
The first part of the picnic basket isn’t as stimulative as this second piece. As has been expounded repeatedly herein, staffing and employment levels aren’t tied to tax incentives — it makes absolutely no business sense to hire employees one doesn’t need just to get a tax break. Businesses hire people when current staffing levels are insufficient to meet demand or to provide an acceptable level of customer service.
However, if a business wants to get a real break — upgrade the computers your staff has been complaining about — you can write them off in a single year. Purchase the new back-hoe, an additional truck, a new fork lift, get your construction company a new skip loader or trencher — depreciate it in a single year. Need new shelving, workstations, desks, storage units, or new computer hardware for the business? Buy’em and get the 100% bonus depreciation! What does this do?
Allowing businesses to avail themselves of the 100% depreciation bonus could very easily spur DEMAND. Increased demand means increased orders, and increased orders may very well mean a need for increased staffing.
And the Senate Republicans filibustered the bill. WHY?
“Reid acted as the two parties could not agree exactly how to go about using the bill to vote on whether to extend the Bush tax cuts. [...] Republicans favor extending the tax cuts, first enacted in 2001, for all income levels. President Obama has proposed extending them only for income less than $250,000, and using the higher tax revenue collected from higher incomes to help close the deficit.” [WaPo]
Translation: The Senate Republican leadership blocked the small business bill because they wanted to protect the Bush Tax Cuts for millionaires and billionaires.
So, a 100% depreciation bonus for manufacturers, construction companies, accountancy firms, restaurants, drilling companies, retailers, grocery stores, furniture outlets, bakeries, bowling alleys, beauty and barber shops, landscape enterprises, law offices, doctor’s offices, automobile repair garages, photography studios, veterinary clinics, waste disposal companies, … was lost because the Senate GOP was focused on protecting the Bush Tax Cuts for millionaires and billionaires. In a word? SAD.
See also: “Fact Sheet: Small Business Jobs and Tax Relief Act,” Senate Democrats, March 26, 2012. Cohn, “Tax Cut Legislation Blocked in Senate,” Accounting Today, July 13, 2012. REMI, “Study on S. 2237, Regional Economic Models, Inc.
Previous posts on small business: H.R. 5297, Small Business Jobs and Credit Act DB July 17, 2010. Finally someone says it — Demand in the Job Creator, DB December 2, 2011. GOP A Thousand Times No, DB July 30, 2010. Breaking the Closed Loop, DB April 29, 2011. Republican Mythology – Small Business Facts and Fantasies, DB May 3, 2012. What’s a Small Business, DB July 16, 2012. *Original post did not include the $500,000 cap.