innovate arkansas

The individual tax rebate checks have received the most attention, but the $168 billion federal economic stimulus package approved by Congress also includes about $50 billion in tax breaks for small businesses.

The National Federation of Independent Business can be given credit for lobbying for the provisions.

Although the business tax breaks may be popular this election year with business owners, they will boost the economy only if businesses use the savings to buy more equipment and hire more workers. It's the same with the individual rebates - the economy will be stimulated only if the money is spent.

The gamble is that during slowdowns, such as the country is now experiencing, businesses could well do what many individuals do: not spend the money since there's a declining demand for goods and services.

The small-business provisions of the stimulus are:

• The doubling of the current small-business expensing limit to $250,000 from $125,000. This provides small-business owners with an immediate deduction for the entire cost of certain investments made in their business, such as buying new equipment, the NFIB said. It applies only to small-business owners who invest less than $800,000 in their business this year, up from $500,000.

• A 50 percent bonus depreciation for certain investments in business. The NFIB said this means a business can take an immediate deduction of 50 percent of the investment, rather than deducting the value over a number of years. Unlike expensing, the bonus depreciation deduction would apply to investments that exceed the $800,000 limit.

The measures will allow small-business owners to immediately write off business purchases and help them expand their businesses this year and hire new employees, the NFIB said.

"Every sector of our economy is represented in our membership," said Sylvester Smith, Arkansas state director of the NFIB, which has about 4,500 members. "From retail shops to commercial insurance agents, car dealerships, exporters and manufacturers; they have all felt the impact of a declining economy.

"The American people are best served when our leaders put aside their differences and work in a spirit of partnership and compromise," Smith said. "The passage of this bill will establish a nearly $1 billion dollar cash infusion into Arkansas' economy."

That impact on the state's economy is what the Department of Finance & Administration figured would result from the entire stimulus package, not just the small-business section.

The provisions will only be applicable on the federal tax forms. The DF&A said the state Legislature would have to approve similar measures before adding them to the state tax forms.

Charles Mazander, owner and president of Mazander Engineered Equipment of Little Rock, which sells and services industrial equipment used in large commercial buildings and in manufacturing and power plants, said the measure is important to business in general to jumpstart the economy.

He was happy the package was approved quickly and didn't get bogged down with Democratic proposals that would have not created jobs. "The point of the legislation was not to grow the welfare state, but to stimulate business and industry so they can create jobs."

Although his own business probably won't be able to use the provisions, he said the manufacturers who do use it to expand and grow will use his services so it will help indirectly.

"The most effective way to create jobs is to increase the cash flow and encourage investment for small firms," said Sen. John Kerry, D-Mass., chairman of the Senate Committee on Small Business and Entrepreneurship.

House Speaker Nancy Pelosi, D-Calif., said that though she's not entirely pleased with the package, she does believe it will help stimulate the economy. If not, "then there will be more to come," she said.

"Our economy is undergoing a period of uncertainty, and there are heightened risks to our near-term economic growth," President Bush said before signing the bill last week, adding that the stimulus should "insure against those risks."

Although the stimulus package has received the approval of economists from both political parties and Congress came together to pass it more quickly than anything in recent memory (it's an election year), only time will tell it will be enough to stave off a recession or at least make it a mild one. :