Small Businesses to qualify for new small loans
With an estimated cost of $7 billion over 10 years, Congress has passed a package of small business stimulus measures. This package will increase tax cuts, spur lending and provide new equity financing. This bill is in response to the increasing costs of starting a business, and will be overseen by the Treasury’s inspector general.
Small business bill cuts taxes
The small business bill is a combined bill that closes tax loopholes and renews tax cuts for small businesses. There would be $3.6 billion in tax breaks for small businesses to be implemented over the next decade. These tax breaks would be paid for by increases in taxes on some large-business investments. Small businesses would also be able to deduct startup expenses from their taxes. This provision of the bill began as a separate measure in Congress, but is being combined as it is sent to the Senate.
Additional money to flow to small businesses
The small business lending bill would create three major avenues for small businesses to get money. First, there would be a $30 billion fund of “preferred stock” that banks would be allowed to tap based on their lending to farms and small businesses. There would also be $2 billion given to states to help increase state-funded loans to small businesses. Third, the Small Business Administration would be authorized to match $1 billion of private investment in startups.
Paying for the small business bill
In order to pay for the estimated $7 billion cost of the small business loans bill, the government will be increasing some taxes. Specifically, tax breaks for Grantor-Retained Annuity Trusts — trusts set up to avoid taxes on gifts — will be rescinded. Additionally, taxes on the sale of some stock would be increased to the point of standard income taxes as opposed to capital gains taxes.
Vote on the small business bill
The small business bill has passed the house on a 241-182 vote. The bill is now being combined with the $3.6 billion tax-cut bill for small businesses and will go to the Senate. The bill is expected to pass the Senate, though not easily. Some Senate Republicans are arguing that this bill is really “another bank bailout” masquerading as a small business stimulus package. Democrats counter that the bill takes a balanced approach to traditional and non-traditional lending for new businesses.