Fast Track?

If The Bridge Act gets past "go," fast-growth businesses could benefit from a tax deferral.
Magazine Contributor
2 min read

This story appears in the February 2004 issue of Entrepreneur. Subscribe »

Sweeping tax reform continues to gain momentum on Capitol Hill, but tax-cut fever has yet to lift a modest proposal designed for the fast-growth entrepreneur. The Bridge Act, a tax deferral program specifically designed for businesses with under $10 million in sales, has had tepid support in the House since its introduction in 2001.

Supporters say the bill just needs to build momentum, but some pundits blame partisan politics. The sponsor of the Senate version is John Kerry, a Democrat whose status as a presidential hopeful may be squelching support from a Republican-dominated Congress. The bill's limited focus has also reportedly reduced its appeal to the Bush Administration. But the bill's sponsors hope that the promise of supporting the job-growth potential of emerging businesses will help overcome this ambivalence.

The Bridge Act aims to help young businesses that are ready to move beyond family savings and credit cards for funding but still can't access capital markets. This works by allowing eligible businesses to defer up to $250,000 in taxes when revenues for the two years prior rose by 10 percent or more. Taxes must be repaid with interest over four years, two years after deferment. The bill's sponsors say that passage will reduce federal tax revenues by $2.4 billion the first year, but will return $1 billion more over 10 years when the deferred taxes are repaid with interest.

"This is not a tax cut," says the bill's cosponsor in the House, Rep. Brian Baird (D-WA). "It's common-sense tax reform with positive returns to the Treasury."

Critics say they'd like to see a bigger financial boost to the entrepreneur. George Cloutier, chairman and chief executive officer of American Management Services Inc., a small-business consulting firm in Waltham, Massachusetts, says he questions how many business owners will benefit since the targeted companies don't owe that much in taxes anyway. The financial return, he adds, doesn't make up for contributing to a business's debt burden.

Still, businesses may have to take what they can get. "While overall reform is our goal," says Jeremy Claeys, director of communications for the National Small Business Association in Washington, DC, "even a stopgap measure is a positive signal."

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