Tax equity is the current rallying cry of small-business interest groups. They want small firms to enjoy the same tax treatment and incentives that larger businesses receive. National Small Business United (NSBU) recently released a report identifying provisions of the tax code that discriminate against small businesses. For example, when Congress tried to help small businesses start pension plans, they created SIMPLE plans. "Yet big business 401(k) plans allow annual employee contributions 57 percent greater than SIMPLE plans," the study found. It's time to close the gap, NSBU asserts.
Here are some other examples of how lawmakers can level the playing field:
- Boost Section 179 expensing limits for new equipment purchases. Currently, small businesses with up to $200,000 in capital investments in the tax year can expense the first $24,000 for tax purposes. A bill introduced by House Small Business Committee Chairman Don Manzullo (R-IL) would increase the limits so businesses with up to $325,000 in investments could immediately expense up to $40,000.
- Expand the use of Medical Savings Accounts, which allow employers to contribute money to accounts set up for their employees to purchase their own health care.
- Provide the self-employed with an immediate 100 percent deductibility of health insurance costs. In 2002, 70 percent of the cost is deductible. By 2003, 100 percent will be deductible.
Small-business organizations intend to push hard for their agenda, saying the time is right to correct what they see as the tax code's inequities.
Great Falls, Virginia, writer Joan Szabo has reported on tax issues for more than 15 years.