Monday, February 01, 2010

The Jobs Bill

Since I am a big proponent of entrepreneurism, I thought it might make sense to give my opinion of the Presidents jobs bill ideas. Now keep in mind, the bill has not been written yet. So the final bill might not have all the parts in it that are currently being proposed. Based on the big three issues, here is my take:

1. Tax Credit of $5,000 per New Employee: This would be fantastic for creating new jobs. Any business would take advantage of this if they could. However, the is a real issue with fraud and abuse. What happens if someone just shuts down one LLC and starts up another one under a different name thereby firing and re-hiring everyone on staff? How this is worked out, remains to be seen. If they can fix the fraud question, then you are likely to see serious job creation this year. 

2. No Capital Gains Taxes for Small Businesses: This to my mind (and experience) would not really be stimulative. A business has capital gains when they sell something for more than what it is shown on their books. For instance, if you have a pickup truck that is fully depreciated and you sell it for $1,000 then you have a capital gain of $1,000. I guess this would reduce the cost of replacing older equipment with newer stuff. That would kinda be stimulative. But the problem is that sometimes you might just sell the truck and not replace it since you laid off the guys who would drive it. The tax reduction is only helpful if people really see the correlation. If it is complex, like capital gains taxes, most won't even know about it and therefore they would not make the actions you want them to make (sell the old truck and buy a new one.)

3. Increase Lending to Small Businesses: This is huge. Right now, the only way to get new money (not loan renewals) is to get a federal guarantee. The feds (SBA, Stimulus and USDA) only have so many people on staff to review all this stuff. That means that there is currently a serious backlog in the lending and borrowing. I know plenty of businesses that could get going if they could just get the money. Increasing the lending is going to be key, but then you need to figure out how to back the feds out of the lending relationships so it will go back to banks and entrepreneurs. Once you are on the i.v. it is hard to get off. 

No comments: