Congress and the administration are working toward an economic stimulus package for the nation. For the small business community to aid the U.S. economic recovery, the administration and the Congress should focus on small business economic incentives.

Congress and the administration are working toward some type of economic stimulus package for the nation. Many members of the small business community would like to see the administration and the Congress focus on small business economic incentives. The U.S. House of Representatives has discussed a variety of options to invigorate a slower economy. Unfortunately, as helpful as many of these items seem, they will not inspire small business growth as much as might be necessary to fuel the overall economy.

Specifically, the House has discussed capital gains cuts, a boost to 30 percent what companies can expense, repeal of the corporate alternative minimum tax, changes to net operating loss carryback rules for business and acceleration of income tax rate cuts already enacted. This package may also include increases in spending for unemployment and health benefits for idle workers. Estimates for items being discussed in the House already total $100 billion.

The administration has rejected calls for an increase in the minimum wage.

As part of a coalition of small business organizations, the Automotive Service Association raised the issue of economic stimuli at a recent hearing by the U.S. House of Representatives Small Business Committee. Although economic issues vary from one small business industry sector to another, there are some concerns that cross industry lines. Consumer confidence, operating capital and the absence of business investment in new equipment and machinery affect practically every sector. Travel and tourism sectors have been hit the hardest but a down economy spares no one.

The tax code may not be best suited to resolve consumer confidence and operating capital issues but it can contribute to business investment. Business investment has fallen 14.6 percent in the second quarter of this year. This is the worst decline since 1982 during the worst U.S. recession since the Great Depression. Clearly, investments in new equipment and machinery should be at the top of the list of economic stimuli.

This can be accomplished by increasing the direct expensing limits under Section 179 of the Internal Revenue Code as well as accelerating technology-aided machinery depreciation. At present, businesses can expense up to $24,000 a year for 2001 and 2002 and $25,000 for taxable years 2003 and later. This expense should be increased at least to $50,000 per year. The phase-out limitation should be increased from the current $200,000 to $400,000.

The Congress should also consider an investment tax credit. This would encourage businesses to invest. This could benefit small businesses. Although cuts in the corporate tax rates, elimination of the corporate alternative minimum tax and a capital gains tax rate cut are positive initiatives, they may not be sufficient to stimulate the aftermarket. There has been a significant drop in small businesses impacted by the alternative minimum tax and the top corporate rates impact less than 7 percent of small business corporations.

Originally, the president proposed a $60 billion plan. Congress has viewed this as a starting place. A significant number of senators are discussing individual tax cuts targeting the poor and middle class.

The small business community has long been ignored on individual industry issues. Large corporations have dominated the public debate about regulatory controls. This includes both labor and environmental issues. This package presents an opportunity for the Congress to begin reviewing the small business community, sector by sector, to determine what will move these industries in the current economic environment.

Repairers need the confidence that the information necessary to repair vehicles will be provided in the future. Why invest in new equipment when one is uncertain as to whether he or she will be in business in the next few years?

Insurers continue to make their case at the state and federal levels about their financial burdens. Their lack of regulation has been a tremendous burden on independent repairers. Surely there is a balance possible beyond what we have today. The current economic cycle should not be an opportunity for large corporations to merely remove regulatory encumbrances. As insurers seek increased assistance in the Congress, the impact of changes in insurance policy on the small business community must be reviewed with energy yet to be seen in this Congress. If insurers move to change current insurance regulatory policy, their relationships to the small business community must be taken into account in the Congress.

In this economy, it should no longer be business as usual for policymakers as they develop economic incentives. What tax breaks impact small businesses and how changes in corporate regulatory policy impact small businesses have to be reviewed with a fervor not seen in many years in order for the small business community to aid the U.S. economic recovery.

Bob Redding is the Automotive Service Association's Washington, D.C., representative. He is a member of several federal and state advisory committees involved in the automotive industry. For more information about the legislative activities of ASA, visit www.TakingTheHill.com.

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