Speaking for Nevada - August 2003

Tax Relief Benefits Nevada’s Businesses and Economy

by Jim Gibbons

Our economy has been sluggish since 2000. The terrorist attacks of Sept. 11, 2001 only exacerbated the economic slowdown. Economists agree that the tax relief enacted in 2001 by Congress and President George W. Bush helped to shorten the duration and impact of this economic slowdown. Yet, we continue to face economic challenges and need to take proactive steps to strengthen and grow our economy. The Jobs and Growth Tax Relief package we passed in Congress and that President Bush signed into law this May takes these next, proactive steps towards helping our small businesses and encouraging investment.

By accelerating the individual income-level tax reductions enacted in 2001, small businesses will receive much-needed assistance, since many file as individual taxpayers. Nationwide, 23 million small business owners would receive tax cuts averaging over $2,200. Additionally, owners of flow-through entities, including many small business owners and entrepreneurs, will receive approximately $9.7 billion in tax relief, thanks to the accelerated tax bracket reductions.

Another component of the tax relief package passed this May is an increase in the expensing amounts allowed for new investment, thus encouraging business owners to purchase new technology, machinery and equipment to expand and modernize. The amount of investment that may be immediately deducted by small businesses would quadruple from $25,000 to $100,000 beginning in 2003. Computer software would also now be eligible for expensing. In addition to the expensing reforms, the first-year bonus depreciation deduction was increased from 30 percent to 50 percent for qualified investments. These provisions offer great new incentives for our businesses to expand – helping to spur economic growth in all industry sectors.

I am especially pleased that the tax relief package included a decrease in the capital gains tax rate. Our nation has one of the highest tax rates on capital gains in the industrial world. In a country where we aim to foster investment, lure entrepreneurs, encourage economic growth and create jobs, America should have the most fair and just tax system. Yet, America’s capital gains tax rates, which affect the cost of capital, and therefore investment and economic growth, are significantly higher than those of other countries, even socialist economies. The average rate of the top 24 world economies is much less than the U.S. capital gains rate. Reducing the capital gains tax rate will reduce the cost of capital, promoting business investment and fostering growth. The reduction will also raise the value of stocks and equities, thereby strengthening millions of workers’ 401(k) and other retirement plans.

Individual achievement and entrepreneurship is what our country was built upon, and the federal government should not cripple our economy with excessive taxes, such as the Death Tax. Too many family-owned businesses, farms and ranches are not passed onto the second generation because of the exorbitant amount of taxes a family must pay on an estate when the owner dies. The Death Tax is simply unfair, and it should be permanently eliminated. We took the first steps in 2001. Now we need to finish the job to ensure that thousands of family businesses across America remain in the family for generations to come.

The average small business owner serves as CEO, accountant, shopkeeper and personnel manager – all at the same time. Simplifying the federal burdens on small business owners will be a welcome relief to thousands of hardworking Nevadans. The Jobs and Growth Tax Relief package simplifies tax compliance and record-keeping burdens by allowing many small businesses to avoid the inherent complexity of depreciation provisions. Yet, we need to further simplify our tax code, which has burgeoned to mammoth proportions – over 2.8 million words – while the epic War and Peace only contains 660,000 words. It is time to repeal outdated and unnecessary taxes – such as the Death Tax – and at the same time, we need to control the growth of the federal government, which has also expanded to mammoth proportions. Achieving both goals certainly is a monumental challenge. However, with the continued advocacy and support of the business community, we can work together towards accomplishing these goals.

Promoting and encouraging business activity is the answer for our struggling economy. It is the answer to lowering our unemployment rate. It is the answer to helping families save for their retirement or their children’s education. And targeted tax relief provides companies with a hospitable environment in which to do business. Reducing the bureaucratic burden and the amount of revenue each business must give to a bloated government enables businesses to hire more employees or invest in new equipment. It is all good news for Nevada’s businesses and the people they employ.