SMALL is BIG!

"President Barack Obama, in one of his most dramatic gestures to business, will propose that companies be allowed to write off 100% of their new investment in plant and equipment through 2011, a plan that White House economists say would cut business taxes by nearly $200 billion over two years...."  By JONATHAN WEISMAN And JOHN D. MCKINNON - Wall Street Journal 9/6/2010


Am I missing something? If most of the jobs are created by small business, and the majority of these businesses are not capital intensive (service businesses, for example). Why does it make sense to created tax savings only for large, capital intensive businesses.



It appears that the economic advisers guiding the government are trying to stimulate the few businesses that employ a lot of employees in each firm, rather than focusing on the large number of businesses that can add one to five employees, or simply make any kind of investment in their firm that will indirectly add employment to the suppliers of equipment, software or services to that small firm. In other words, perhaps SMALL is BIG when it comes to investment to create jobs.


Another aspect of this bothers me. Tax savings can occur only if you are paying taxes. Many small businesses and some large ones are not generating profits, so taxes are relatively low and additional tax write offs are not of immediate value. Most small businesses do not pay taxes at the corporate level, so to help these businesses, the income tax on small business owners (remember those proverbial "rich" guys and gals earning more than $250,000 per year) could be reduced. Payroll tax reduction would also put cash flow into these businesses. That would give those small businesses the positive cash flow to allow them to borrow capital to take advantage of opportunities in their areas of business.

What am I missing? -JOHN

 
If you would like John or Rosemarie Boyd to speak to your group or organization on financial planning or investment strategies contact Rosemarie at rboyd@boydstrategy.com or call her at 508-754-3226. The comments on this blog do not represent individual Investment, Tax or Legal Advice, and do not represent an offer to buy or sell any security. Consult the appropriate professional before acting on any idea seen here.

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