(Archived Content)
FROM THE OFFICE OF PUBLIC AFFAIRS
JS-413
By accelerating tax reductions that were enacted in the 2001 tax act, the Jobs and Growth Tax Relief Reconciliation Act would provide small business owners with much needed assistance.
23 million small business owners would receive tax cuts averaging $2,209.
Accelerating the reduction in the top marginal rate scheduled to take effect in 2006 (to 35%) to 2003 would help small businesses.
Owners of flow-through entities, including small business owners and entrepreneurs, comprise two-thirds (about 400,000) of the 600,000 tax returns that would benefit from accelerating the reduction in the top tax bracket scheduled for 2006 to 2003.
These small business owners would receive 79% (about $9.7 billion) of the $12.4 billion in tax relief from accelerating the reduction in the top tax bracket to 35% from 2006 to 2003.
The increase in the expensing for new investment would encourage small business owners to purchase the technology, machinery, and other equipment they need to expand.
The amount of investment that may be immediately deducted by small businesses would quadruple from $25,000 to $100,000 beginning in 2003. The amount of investment qualifying for this immediate deduction will begin to phase out for small businesses with investment in excess of $400,000 (doubled from $200,000). Both parameters are indexed for inflation beginning in 2004. Computer software would be eligible for expensing. The provision sunsets after December 31, 2005.
The increase in expensing provides incentives for small businesses to grow.
Small business owners who purchase equipment to grow and expand will get assistance through this provision. The increase in expensing encourages capital investment by small businesses.
Tax compliance and record-keeping burdens would be simplified by allowing many small businesses to avoid the inherent complexity of depreciation provisions.
Office of Tax Policy
May 22, 2003