Today in Washington – September 28, 2004
The House has 85 suspension votes scheduled for today. The Senate will vote on whether to debate S. 3816, the so called “Creating American Jobs and Ending Offshoring Act.” If that vote fails, as expected, then there will be a vote on cloture H.R. 3081, the underlying bill containing a continuing resolution. The House and Senate must pass a continuing resolution by October 1st to keep the government running for a few more months.
Yesterday, President Obama signed TARP, Jr. into law. According to the Reuters, President Obama said yesterday that “it was critical that we cut taxes and make more loans available to entrepreneurs. So today after a long and tough fight, I am signing a small business jobs bill that does exactly that.” This bill only cuts taxes for some and it does not make traditional loans available to entrepreneurs. Furthermore, this is a solution in search of a problem. Banks will not be loaning small businesses more monies as a result of this new law.There is a provision that allows a 100% exclusion of small business capital gains taxes. Many House Republicans lamented that this provision would only apply to a small segment of small businesses. This new law also has some other tax provisions dealing expanding credits, but it also has some “revenue offsets” that will increase some taxes on small business. One provision modifies the 1099 reporting requirement and increases, penalties (i.e. taxes), for those who do not file correct returns. This is a paperwork nightmare for small businesses. This new law decreases small business taxes on one hand, while increasing taxes on the other hand.
Another troubling provision in this new law is the establishment of a TARP for small business. The AP reports that “most in the GOP objected to the loan fund, comparing it to the 2008 financial industry bailout and arguing that it would encourage banks to make loans to risky borrowers.” The decrease in taxes for many companies does not justify expanding the idea of TARP for small businesses.
As I wrote a few months ago, the big problem with the idea is the following:
The legislation creates a federally run new bureaucracy called the “Small Business Lending Fund. ” To qualify a financial institution has to have less than $10 billion in assets and the new creation would have up to $30 billion in new investment authority. This allegedly temporary program is set up “without further appropriation of fiscal year limitation,” i.e. not temporary, to purchase “preferred stock and other financial instruments” from small business as a means to infuse money into local banks with the condition that they lend to failing small business. Local banks will be lending in exchange for equity small business, therefore these banks will be using federal monies to buy equity in companies. This is an idea born from socialism and one that will harm the free market for small business, because failure will be rewarded by federal subsidies while success will be punished.
Don’t be fooled when proponents of this idea run around the country claiming they cut taxes for small business and allowed more liquidity to help small businesses expand. That is not true.
The truth is that these liberals cut taxes for some small businesses while increasing taxes and fees on others. At the same time they expanded the Department of Treasury’s control into the realm of small local banks. This idea will further expand federal government control over the economy into small local banks and small business as a result of this new law.