Wednesday, September 29, 2010

Another Continuing Resolution

Nydia Velazquez' continuing war against the interests of small businesses notwithstanding, we've got yet another reprieve for SBIR and other SBA programs (number nine in a long series of continuing irresolutions, for those keeping count). Why is she still chairwoman of the House Small Business Committee?


Title: A bill to provide for an additional temporary extension of programs under the Small Business Act and the Small Business Investment Act of 1958, and for other purposes.

Sponsor: Sen Landrieu, Mary L. [LA] (introduced 9/24/2010) Cosponsors (1)
Related Bills: H.R.3614, H.R.4508, H.R.5849, S.1513, S.1929, S.3253
Latest Major Action: 9/28/2010 Cleared for White House.
9/24/2010 Introduced in Senate
9/24/2010 Passed/agreed to in Senate: Introduced in the Senate, read twice, considered, read the third time, and passed without amendment by Unanimous Consent.
9/28/2010 Passed/agreed to in House: On motion to suspend the rules and pass the bill Agreed to by voice vote.
9/28/2010 Cleared for White House.

Thanks to Rick Shindell and all the SBIR advocates out there who overflowed Speaker Pelosi's voice mail, and contacted their own Representatives. Now let's get some real resolution in the form of reauthorization.

Wednesday, September 22, 2010

Repeal the New 1099 Requirements Now!

Embedded with the recent healthcare legislation was a misdirected effort to raise $17B in revenues over ten years by burdening small businesses with an onerous reporting requirement that according to the National Small Busines Association (NSBA) would increase the average number of required 1099s a small firm would need to file from 10 to 86! The new rules, set to go into effect for 2012 purchases, would require a 1099 report for "any purchase from a vendor of goods or services worth $600 or more during the calendar year".

The Senate recently failed to repeal this requirement. Several new efforts in both the House and Senate are directed at redressing this matter. Of particular note:
Rep. Dan Lungren (R-CA) is sponsoring the Small Business Paperwork Mandate Elimination Act (H.R. 5141), that would fully repeal the reporting requirement, but does not offset the lost revenue.

Sen. Mary Landrieu (D-LA), Chair of the Senate Committee on Small Business and Entrepreneurship, is sponsoring the Information Reporting Modernization Act of 2010 (S. 3783), which would raise the threshold for businesses to file information reports to $5,000 from its current level of $600 and would index the threshold to inflation after 2012. Unlike a similar recently failed amendment to the small business bill (S. Amdt. 4595 to H.R. 5297), offered by Sen. Bill Nelson (D-FL), Landrieu's proposal would not exempt businesses with fewer than 25 employees and does not include an offset to pay for the change.

Perhaps it's too much to ask, but it'd sure be nice if we could put aside campaign posturing for just a moment and focus on actually taking care of the business of governing! The proposals are out there. How many other politicians will step up to the plate and just swing?

Monday, September 20, 2010

Innovation vs. Old School Short-Sightedness

Today's Financial Times, includes a news analysis quoting the former U.S. Auto Czar Steven Rattner comparing allowing the auto inustry to fail with "dropping the economic equivalent of an atomic bomb on the Midwest."

Dramatic, huh? The question is... what would constitute "allowing the auto industry to fail." See, to my mind, encouraging transformative technological advances with the potential not only to retain old jobs but create new ones is a viable alternative to injecting good cash into bad businesses.

Try this on for size: rather than propping up the behemoth auto makers, why not create a pool of cash, say $100 million (small change to what they threw at the giants) to finance a handful of awards for projects that would push the envelope, creating, developing, and commercializing innovative automotive technologies, and a whole bunch of jobs with them. It'd be a cross between SBIR and public venture capital.

Why does it have to rest on private initiative, like the Automotive X-Prize to support these sorts of projects? Rather than arguing that allowing some particular old firms to fade is the equivalent of letting the automotive industry fail, perhaps government officials would do better to think outside the box. If we're going to spend taxpayer dollars on supporting business, why not do it in a way that supports society and job creation as well?

Problem is: if you hire people like Steven Rattner, former private equity executive, to run a bail-out scheme, you're likely to get results in line with old school short-sighted thinking. Perhaps it's time to be bold!

Friday, September 10, 2010

Taxes & Small Businesses

Arguing that the sunset of the previous administration's tax cuts for those earning more than $250k net will hurt small businesses & job creation seems a bit of a stretch. Here's a post on the subject on Growthology. Be sure to read the comments, in particular note the following remark: "Wouldn't the fact that pass through profits are taxed at a high rate encourage reinvestment? If we want businesses to hire then pulling money OUT of the business should be discouraged."

And here is a letter to the editor of the Wall Street Journal from this morning:
Your Sept. 3 op-ed "The Small Business Tax Hike and the 97% Fallacy" by Kevin A. Hassett and Alan D. Viard makes a misleading argument about small businesses in order to justify borrowing $700 billion to finance the extension of the Bush tax cuts for the wealthiest 2% of Americans.

Messrs. Hassett and Viard concede that 97% of small businesses will pay nothing more in taxes under the president's plan to allow the Bush high-income tax cuts to expire on schedule. Yet they argue that even if only 3% of small-business owners would be affected, this small fraction reports a large amount of what they term "small business" income.

The problem with their argument, however, is that it counts any type of partnership income, sole proprietor income, or S corporation income as small-business income. Thus, they count as small-business income profits that go to a partner at a major law firm or hedge fund. Our analysis indicates that small-business owners under this definition, who would be affected by allowing the top two rates to increase as scheduled, have an average gross income of over $1 million. Keeping the Bush tax cuts in place for these taxpayers would not likely result in additional job creation, and it would add significantly to federal budget deficits and debt.

The experience of tax policy over recent decades clearly demonstrates, and the Congressional Budget Office has confirmed, that tax cuts for the highest-income Americans—regardless of whether their earnings are classified as ordinary or small-business income—are not an efficient way to stimulate the economy or create jobs.

Michael F. Mundaca
Assistant Secretary of Treasury for Tax Policy
Treasury Department