Few members of Congress are business people, so they don't really understand what it takes to start, run and expand a business -- small or large. Before I was elected to Congress, I spent my life starting and building businesses.
So I understand the challenges our economy faces and the need to remove financial and regulatory hurdles stifling private sector growth. That is why I am focusing my efforts on four actions Congress can take in the next week, which can have an immediate effect on small businesses -- and improve our economy.
Repeal the 1099 Provision
Starting in 2012, all businesses are required to file 1099s for every vendor they purchase $600 worth of goods or services from. The law was well intentioned, to crack down on people who don't pay their taxes. Unfortunately, it's likely to result in a burdensome amount of paperwork for our small businesses -- largely with most of the work falling on those who play by the rules.
To fix this, I introduced the Small Business Tax Relief Act, which would eliminate the 1099 reporting provision, giving time and resources back to our small businesses and enabling them to grow. This is not a partisan issue -- just common sense.
Expand the Small Business Administration Loan Program
This is one of the best resources the federal government has to offer. It helps provide businesses with the capital they need to expand and create jobs. It works because it is a public-private partnership -- the SBA guarantees small business loans made through local community banks. This partnership is a great example of our government leveraging private dollars to spur private economic activity.
The SBA loans are limited in size. The Small Business Job Creation and Access to Capital Act would permanently increase the SBA loan limit to $5 million from $2 million. This increase means that the program can help more businesses start up, expand and hire new workers. For the past 50 years, this program has basically paid for itself while helping private businesses, which have created 10 million new jobs.
We need our businesses to invest and expand. Accelerated depreciation is one of the fastest ways to get the private sector to buy new equipment, open new stores, purchase vehicles and hire new workers. Allowing companies to deduct their new capital expenditures immediately makes these purchases more affordable and can rapidly spur business investment. This is crucial today -- when credit is tight for our small businesses.
The beauty of this policy is that it doesn't cost the government much. While businesses get to claim as expenses more of their costs today, they have less to claim next year, so over time, the policy is tax neutral. We should pass bonus depreciation immediately for next year -- and help our businesses make needed capital investments.
No Capital Gains Taxes for New Businesses
Most new jobs are created by new businesses in their first five years. We need more entrepreneurs starting new businesses. To encourage this we should offer entrepreneurs and investors a better deal.
If you start a new business or invest in a new business over the coming year, you shouldn't have to pay any capital gains taxes when you sell the business -- provided you have been building the business for at least five years. This incentive will encourage more Americans to follow that classic American dream of being their own boss and starting their own business. It should also help kick-start our economy.
These four actions are rational, fiscally responsible and, in the middle of our complicated economic environment, relatively easy to implement. Moreover, they can be implemented in the next week to make a difference today. And finally, they demonstrate that by using public-private partnerships, we can generate significant private investment with little cost and little risk to the U.S. taxpayer.
I urge Congress to act now. It should put our small businesses -- and our long-term economic prosperity -- first.