Capital & Credit Watch 2009: Letters to Congress

Open Letter to Congress

Economic Stimulus Needs to Focus on Job Creation, Innovation and Supporting Entrepreneurs

January 9, 2009

Dear Member of the United States Congress:

Forthcoming action on an economic stimulus/recovery package provides Congress with the opportunity to advance a meaningful set of tax policies to provide an immediate shot in the arm to our economy, while helping to construct a durable foundation for long-term economic growth.  While SBE Council is pleased that President-elect Barack Obama has included tax incentives as part of his proposed stimulus package, we believe the plan can be improved through the inclusion of measures that support long-term stability and growth. 

A key driver of uncertainty in the small business community is the fact that beneficial tax changes are temporary, or extended on a year-to-year basis.  This chaotic and short-term approach to tax policy is not conducive to helping firms plan and execute, on a multi-year basis, their key investments or operational strategies they wish to pursue.  Therefore, the intent that underlies these tax incentives is significantly diluted.

We strongly encourage Congress to advance measures that help bring much needed certainty to business resource planning, which in turn will lead to constructive investment and innovative outcomes. A rationale approach to tax policy will produce sustained job creation, economic growth and more innovation.  SBE Council believes it is critically important that Congress now move to make key tax relief measures - now temporary, or extended on a year-to-year basis -- a permanent feature of the business-planning landscape.  

The list of specific tax measures below will help to leverage the resources that will be directed to technological investments -- including goals to accelerate broadband deployment, alternative energy investment, as well as investments in "transition economies" or those regions of the nation that have been hit hard by the recession.

So, for example, rather than advancing tax measures that provide businesses with tax credits to retain or hire workers, SBE Council believes it is far more prudent to focus on incentives that enable firms  -- and our nation - to build their capacity to create high-paying jobs, and to become more competitive, efficient and innovative. Therefore, SBE Council encourages Congress to advance the following package of tax measures: 

• Make permanent the Research and Development tax credit.
• Make permanent current Section 179 expensing levels/bonus depreciation for small business.
• Make permanent the current capital gains tax rate of 15 percent, and introduce zero capital gains for investment in start-ups.
• Make permanent the Internet Tax Moratorium.
• Repeal the 3 percent withholding mandate on government contractors to help businesses preserve capital, while allowing governments at all levels to save the funds that are currently being expended to establish bureaucracies for implementing the mandate.
• Extend for three years lower individual income tax rates (the current rates). (During the three-year period, Congress and the Obama Administration need to quickly establish an initiative to reform the tax system with the goal of making it more fair, simple and internationally competitive.)

SBE Council is very concerned that the hundreds of billions of federal dollars being proposed to "inject" into the economy will be limited in its effectiveness, and will do little to solve systemic problems related to our nation's competitiveness.  Utilizing the economic stimulus package as a vehicle to begin to address the tax certainty that entrepreneurs so desire will not only drive positive economic activity that will be beneficial in the short-term; it will put the U.S. economy on firm and competitive footing once our economic woes are well behind us.

Thank you for considering the views of entrepreneurs and the SBE Council.

Sincerely,

Karen Kerrigan, President & CEO