FACT SHEET: President Obama Has Signed Eight Small Business Tax Cuts Into Law, Pledges to Sign Eight New Tax Cuts Benefitting Millions of Small Businesses
I. President Obama Has Already Signed Into Law Eight Separate Small Business Tax Cuts: In the Recovery Act and subsequent legislation in 2009 and 2010, the President signed the following eight small business tax cuts into law:
- A New Small Business Health Care Tax Credit
- A New Tax Credit for Hiring Unemployed Workers
- Bonus Depreciation Tax Incentives to Support New Investment
- 75% Exclusion of Small Business Capital Gains
- Expansion of Limits on Small Business Expensing
- Five-Year Carryback of Net Operating Losses
- Reduction of the Built-In Gains Holding Period for Small Businesses from 10 to 7 Years to Allow Small Business Greater Flexibility in Their Investments
- Temporary Small Business Estimated Tax Payment Relief to Allow Small Businesses to Keep Needed Cash on Hand
II. The President Intends to Sign a Small Business Jobs Bill With Another Eight Tax Cuts Benefitting Millions of Small Businesses: For weeks, Republicans have been stalling progress of a Small Business Jobs Bill that would provide additional tax relief for millions of small businesses, including the following eight tax cuts:
- Zero Capital Gains Taxes on Key Investments in Small Businesses:
- The Highest Small Business Expensing Limit Ever– Up to $500,000
- An Extension of 50% Bonus Depreciation
- A New Deduction for Health Care Expenses for the Self-Employed
- ax Relief and Simplification for Cell Phone Deductions
- An Increase in The Deduction for Entrepreneurs’ Start-Up Expenses
- A Five-Year Carryback Of General Business Credits
- Limitations on Penalties for Errors in Tax Reporting That Disproportionately Affect Small Business
III. President Obama is Proposing Tax Cuts for Millions of Real Small Businesses, While Republicans Are Using Pretext of Helping Small Business to Fight for An Average of $100,000 in Tax Cuts for Those with Incomes Over $1 Million
- The President’s Eight New Small Business Tax Cuts Would Directly Help Millions of Real Small Businesses:
- Make 4.5 million small businesses and individuals eligible to increase the amount of investments they can write off
- Extend bonus depreciation for 2 million businesses, small and large
- Make investments in 1 million small businesses eligible for zero capital gains taxes
- Allow 2 million self-employed to receive a deduction for health insurance costs on self-employment taxes
- Enable virtually all small business owners to more easily receive a deduction for their use of cell phones
- While Republicans Claim that Their Push for High Income Tax Relief is Motivated by Concern for Small Business, 84% of the Tax Relief Goes to Those Making Over $1 Million: Republicans are holding middle class tax cuts hostage to borrow $700 billion to pay for tax cuts for the wealthiest 2% of earners. While they claim this effort is would help entrepreneurs and small businesses, according to the Joint Committee on Taxation, 84% of the tax relief would go to taxpayers with incomes of over $1 million.
- The High Income Taxpayers They Are Fighting to Get Tax Relief For Are Hardly What Most Americans Think of as Small Businesses: While Congressional Republicans’ rhetoric would imply they are fighting for start-ups, mom-and-pop store owners and aspiring entrepreneurs, they count as “small businesses” making “small business income” any and all high income taxpayers with any type of partnership income, sole proprietor income, or S corporation income. Thus, under their definition, the following are all counted as small businesses:
- Each partner of a major corporate law firm
- Billionaire hedge fund managers
- Over 50% of the top 400 taxpayers with the highest adjusted gross income, according to the IRS – a group that averaged $344 million each in income in 2007
The Small Business Jobs Bill: Providing Tax Relief to Millions of Small Businesses
The President has called on Congress to pass a strong Small Business Jobs Bill so that millions of small businesses can get the tax relief and access to credit that they need to expand, grow and hire. Included in the Small Business Jobs Bill are the following eight tax cuts:
- Zero Taxes on Capital Gains from Key Small Business Investments: Under the Recovery Act, 75 percent of capital gains on key small business investments were excluded from taxes. The Senate Small Business Jobs Bill temporarily puts in place for 2010 a provision called for by the President – elimination of all capital gains taxes on these investments. Key investments in 1 million small businesses would be eligible for this tax cut.
- Extension and Expansion of Small Businesses’ Ability to Immediately Expense Capital Investments: The bill temporarily increases for 2010 and 2011 the amount of investments in new plants or equipment that 4.5 million small businesses would be eligible to immediately write off to $500,000 – its highest limit ever – while raising the level of investments at which the write-off phases out to $2 million.
- Extension of 50% Bonus Depreciation: The bill extends through 2010– as the President proposed in his budget – a Recovery Act provision for 50 percent “bonus depreciation” for 2 million businesses, large and small, providing them with incentives to invest in plants and equipment by accelerating the rate at which they can deduct capital expenditures.
- A New Deduction of Health Insurance Costs for Self-Employed: The bill would allow 2 million self-employed to deduct the cost of health insurance in 2010 for themselves and their family members in calculating their self-employment taxes. This provision is estimated to provide over $1.9 billion in tax cuts for these entrepreneurs.
- Tax Relief and Simplification for Cell Phone Deductions: The bill would change tax rules so that the use of cell phones can be deducted without burdensome extra documentation – making it easier for virtually every small business in America to receive deductions that they are entitled to.
- An Increase in the Deduction for Entrepreneurs’ Start-Up Expenses: The bill would temporarily increase in 2010 the amount of start-up expenditures entrepreneurs can deduct from their taxes from $5,000 to $10,000 (with a phase-out threshold of $60,000 in expenditures), offering an immediate incentive for someone with a new business idea to invest in starting up a new small business.
- A Five-Year Carryback Of General Business Credits: The bill would allow certain small businesses to “carry back” their general business credits to offset five years of taxes – providing them with an instant tax break – while also allowing these credits to offset the Alternative Minimum Tax, reducing taxes for these small businesses.
- Limitations on Penalties for Errors in Tax Reporting That Disproportionately Affect Small Business: The bill would change the penalty for failing to report certain tax transactions from a fixed dollar amount – which was criticized for imposing a larger penalty on small businesses – to a percentage of the tax benefits from the transaction.
Lending Support to Small Businesses Still Struggling to Access the Credit They Need to Expand and Hire: With many creditworthy small businesses still struggling to get the credit they need to grow, the Small Business Jobs Bill would also:
- Create a new $30 billion Small Business Lending Fund
- Establish a State Small Business Credit Initiative to strengthen state programs that support private-sector lending to small businesses
- Extend successful Recovery Act provisions raising SBA loan guarantees and eliminating fees
- Double the maximum size of most SBA loans