Tax Cuts for Small Businesses Make Way for Thousands of Jobs in South Jersey

Today, Congressman Rob Andrews announced a new provision under the American Recovery and Reinvestment Act (ARRA) designed to put Americans back to work and get our economy growing again. At the forefront of this legislation are provisions set out to benefit America's small businesses, which are responsible for generating over 70 percent of all new jobs over the last decade. While the ARRA provides small businesses with the largest tax cut since the Second World War, these provisions are significant as they strongly encourage small businesses to invest more in capital expenditures. Thus, not only do the newly awarded tax breaks and incentives assist those at the backbone of our economy, but they also provide the relief necessary to increase small businesses' consumer and retail spending as an effort to stimulate the economy towards long-lasting growth.

Under the ARRA, small businesses will receive incentives to purchase assets for their business needs by increasing depreciation and equipment expense tax deductions. First, the ARRA extends the depreciation bonus created by the 2008 Economic Stimulus Act. Companies that buy new equipment in 2009 will now be able to depreciate an additional 50 percent of the purchase cost. Second, small businesses can now double their tax write-off on purchases of new or used equipment made in 2009, increasing the expensing limit from $125,000 to $250,000. Additionally, the ARRA increases the phase out level from $500,000 to $800,000, thus companies can spend an additional $300,000 on their business needs and still reap the full benefits of this write-off. Third, the ARRA allows businesses with gross receipts of $15 million or less, which encompasses the vast majority of small businesses, to elect to offset net operating losses incurred in 2008 against income earned in up to five prior years. Therefore, businesses can now carry losses back an additional 3 years as opposed to the normal two-year carryback. Finally, most small businesses owners will receive a reduction in their estimated tax payments. The ARRA allows small business owners to base their 2009 quarterly tax payments on 90 percent of their 2008 taxes, rather than 110 percent as previously required. The majority of small business owners are eligible for this reduction in estimated tax payments, as qualified employers must have less than 500 workers, report an adjusted gross income of less than $500,000 and certify that more than 50 percent of their prior-year gross income was from a small business.

"Small business tax cuts are estimated to create 3 to 4 thousand jobs in South Jersey over the next year or so," Congressman Andrews reported to the media today. "These are provisions that will lead us out of the economic mess we are in and help solve a piece of the problem."

At a time when consumer and retail markets continue to suffer, the small business tax cuts will afford many companies with the capital needed to purchase equipment that they would otherwise be forced to go without. By stimulating small business expenditures, manufacturers and retailers will receive the revenue necessary to hire more workers to respond to the increase in small businesses' demand for equipment. As unemployment reaches a 25-year high, Congressman Andrews continues to support legislation like the ARRA, which allows small businesses to meet their equipment needs while addressing our nation's overarching economic challenges.

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