U.S. Senator Ben Cardin (D-MD), a member of the Senate Small Business and Entrepreneurship Committee, urged his fellow senators to set their partisanship aside and support the backbone of the American economy by passing the Small Business Jobs Tax Act. A procedural vote Thursday blocked the Senate from moving forward with the legislation.
"Small businesses create jobs. The best way to help our economy grow stronger and reduce our deficit is to have more Americans earn a paycheck. It is outrageous to me that we are being blocked from helping small businesses be in a position to hire more workers just when our economy needs it most.
"The Small Business Jobs Tax Act (S. 2237) would help real small business create real jobs rather than give away billions of tax dollars to companies earning more than $1 million a year. We all say we want to help small businesses succeed, so let's end the partisan gridlock and move forward with a bill that will create incentives for hiring and encourage capital expenditures."
Senator Cardin also expressed his disappointment that an amendment compiled by Small Business Committee Chair Mary Landrieu (D-LA), including two of his provisions, also failed to garner enough votes to proceed. Senator Cardin's measures (1) would have made permanent an increase in the SBA surety bond limit from $2 million to $5 million; and (2) would have helped small businesses that converted to S corporation status prior to 2007, giving them flexibility to put any locked-in appreciated property to better use without paying punitive levels of tax.
"The Senate should be united in removing unnecessary barriers to entry and competition for small businesses and help them fairly compete with much larger businesses. As a member of the Finance and Small Business Committees, I am acutely concerned about the impact of the on-again, off-again approach to tax policy on economic growth. In recent years, we've allowed many important tax provisions to expire for months at a time, increasing the uncertainty that employers face and reducing the incentives of the tax provisions when they are eventually extended. Businesses need certainty and predictability before making decisions to invest and hire," Senator Cardin added.
For a small business to get a government contract over $100,000, it has to put up a surety bond. The SBA has a program to help small businesses obtain surety bonds, but the SBA program has a limit of $2 million. For any contract over $2 million the program cannot be used. Since government procurement often involves contracts much larger than $2 million, Congress adopted a Cardin provision that would temporarily increase the limit to $5 million, as part of the American Recovery and Reinvestment Act. The temporary increase in the limit expired in 2010.
The Surety Bond limit increase has been an unqualified success, far exceeding targets set by SBA for both the amount of bonds issued and job creation. The initial target for the program was to issue $147 million in bonds to support projects over $2 million. The March 2010 SBA Performance Report indicated that more than $360 million in bonds were actually issued. The SBA Office of Surety Guarantees reports that there has been just one default on a bond over $2 million since the higher limits were implemented.
The Small Business Jobs Tax Act would create incentives for more hiring by allowing employers to take a 10 percent tax credit when they increase their payrolls. It encourages increased spending by businesses by allowing them to expense capital expenditures made in 2012. When companies start buying equipment, it creates jobs throughout the economy.