June 18, 2018
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Collins’ bill makes tax code more predictable for businesses

By Peter Gore, Special to the BDN

Ask small business owners what they feel is the greatest impediment to the growth of their business and the hiring of new workers in today’s economic climate, and you will receive a resoundingly common reply: Uncertainty.

As job creators, small business owners play a vital role in our economy. Nearly one out of every four workers in Maine is employed by a company that has less than 20 employees. Nationwide, businesses with fewer than 500 employees employ nearly half of all American workers, and they generate roughly half of our nation’s economic output. When small businesses are successful, they expand. New jobs are created, and our economy grows.

The entrepreneurial spirit that characterizes our small business owners is classically American. Through a combination of hard work, determination and ingenuity, small businessmen and women create enterprises that employ others and provide valuable goods and services for the greater good.

In order to succeed, small business owners must take risks. But if there is one thing in particular that they would ask for more of, it would be predictability.

Predictability allows business owners to take calculated risks and form long-term plans. With predictability, they can make sound capital investments that expand their businesses and create new jobs. Tell a business owner what the cost is, and she will make an informed decision.

Unfortunately, there is too much unpredictability when it comes to taxes today, and that uncertainty is a major economic impediment.

An example of this uncertainty can be found in Section 179 of the tax code, which allows small businesses to deduct more rapidly the cost of acquired assets — equipment and other durable materials that are a vital part of a business’ routine operations. The amount of the maximum allowable deduction has changed three times in the past six years and is usually addressed as a year-end “extender” by Congress, making this tax benefit unpredictable from year to year, and therefore it’s difficult for small businesses to take full advantage of it in their long-range planning.

Fortunately, Sen. Susan Collins, R-Maine, has introduced a bill in the U.S. Senate that would provide small business owners across Maine and the country the certainty that they desire and need. The aptly named Small Business Tax Certainty and Growth Act of 2013 would set the maximum allowable deduction under Section 179 at $250,000, indexed for inflation, and it would ensure that only small businesses can take advantage of the benefit by phasing it out as acquisitions exceed $800,000. Collins’ bill also extends other provisions that encourage investment in equipment and improvements to facilities. In my experience, these investments help fuel growth and hiring.

The provisions in Collins’ Small Business Tax Certainty and Growth Act would have real-world effects and make an enormous difference for a person looking to start a new small business in Maine or across the country. They would help the business’ ability to survive and thrive. A company’s ability to start and then expand and grow jobs would be fueled by the cost recovery provisions. Tax savings could then be reinvested in the business, thus allowing the business to create even more jobs. Furthermore, the economic benefits beyond the new business would be multiplied when you consider the effect on a company’s investment in manufacturing equipment, transportation needs, material suppliers, etc. All in all, Collins’ legislation would provide the certainty a small business needs to grow.

The legislation would alleviate burdens on small businesses in other important ways. It would reduce complexity for small businesses by allowing more companies to use the intuitive cash method of accounting by permanently doubling the threshold at which the more complex accrual method is required, from $5 million in gross receipts to $10 million. The use of simplified accounting methods for inventories would also be expanded.

Finally, Collins’ bill would provide assistance to newly-formed small businesses during their first year of operation, a critical time. Her bill permanently doubles the deduction for business start-up expenses from $5,000 to $10,000. This provision is targeted to provide a benefit only to small businesses by phasing out the deduction as start-up expenses exceed $60,000.

The Maine State Chamber of Commerce thanks Collins for introducing this common-sense bill, which would provide much-needed certainty for our businessmen and women. By working together, our leaders in government and our businessmen and women can address these important issues and move our economy forward and create more jobs.

Peter Gore is vice president of government relations at the Maine State Chamber of Commerce.

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