(Michigan City, IN) Today, Congressman Joe Donnelly visited the Entrepreneur Center in Michigan City to discuss $4.84 billion in tax cuts for small businesses that recently went into effect.
The centerpiece of the legislation makes changes to Section 179 of the United States tax code which allows a small business to purchase and write off equipment necessary to its trade. Previously, businesses that earned $450,000 or less could deduct $112,000 under Section 179. The legislation approved by Congress increases the income limit to $500,000 and the allowable deduction to $125,000. These changes allow more small businesses to write off a larger portion of their necessary costs, thus making them more competitive.
The bill also expands the Work Opportunity Tax Credit (WOTC), which provides incentives for employers to hire certain individuals who frequently experience barriers to work, including at-risk youth and disabled veterans. Additionally, it ensures married couples who jointly own a small business both receive credit for paying Social Security and Medicare taxes.
“We strengthen our economy when we facilitate the growth of small businesses across the Second District, especially those that get their start here at the Entrepreneur Center in Michigan City,” Donnelly said. “I want to see the businesses that begin here grow into successful enterprises. These tax cuts help small business flourish by making it easier for them to invest in new technology and hire skilled workers while also allowing them to write off certain capital costs. And, when small businesses grow, we all benefit.”
According to data released by the Small Business Administration (SBA) in 2005, there are 473,500 small businesses in the State of Indiana. Of those small businesses, 125,532 had employees and together provided more than 1.2 million jobs in the state.
“Small businesses drive our economy in Indiana and it is in our best interests to help them succeed,” Donnelly said. “From rewarding the hiring of those who desperately need jobs to recognizing the extra challenges some small businesses face, this tax package does right by the small businesses that fuel America’s economy.”
In February, Donnelly co-sponsored and the House passed $1.3 billion in small business tax cuts. However, the Senate approved $12 billion in small business tax cuts when they took up similar legislation. The final figure of $4.84 billion in tax cuts for small businesses is the result of negotiations between the House and the Senate.
In order to comply with the new pay-as-you-go rules approved by Congress in January, the bill offsets the $4.8 billion in small business tax cuts through several provisions designed to crack down on tax fraud and abuse. For example, it creates new penalties for those who file claims for refunds without a reasonable basis. Further, it expands the current penalties on income tax preparers who understate a taxpayer’s liability on tax returns by expanding the scope to include returns relating to estate and gift taxes, employment taxes, excise taxes, and returns from exempt organizations.
“It is important to me that we provide tax relief to small businesses in a fiscally responsible manner,” Donnelly said. “The compromise reached between the House and the Senate helps small businesses meet the challenges of succeeding in today’s global economy without adding to our national debt.”
###
