The National Federation of Independent Business (NFIB) released new research projecting nearly 200,000 more jobs and billions in higher economic productivity if Congress and the President agree to permanently increase the amount that businesses can deduct for capital investments, also known as small business expensing.
“Reducing the cost of business investment leads to more business investment,” said NFIB CEO and President Dan Danner. “If there’s a good argument to be made against that result I’d like to hear it.”
Congress this week will vote on a measure to make permanent the current thresholds in section 179 of the IRS code, under which businesses can deduct from their tax obligation the full cost of new equipment or capital upgrades. The problem, according to Danner, is that this small business tax incentive has routinely expires every year unless Congress extends it—often retroactively. Making the provision permanent would also make it predictable, giving businesses the confidence they need to invest in themselves, create jobs and boost the economy.
“Recently small businesses have had to wait until the last minute to decide whether to make big investments,” he said. “It’s a very inefficient system that freezes big decisions until the end of the year and very likely discourages a lot of economic activity that would be otherwise very good for local communities and the broader economy.
The legislation would permanently restore the $500,000 threshold, which fell all the way down to $25,000 this year.
“That would encourage more businesses to make bigger investments, which would generate a lot more economic activity,” said Danner. “Businesses that know they can recoup the cost of big-ticket investments, like new machinery or vehicles or farming equipment, are a lot likelier to make the commitment. It’s good for the purchaser, of course, but it’s also good for the firms that manufacture and market the products because they’ve got more buyers. It’s a way to spur the economy and get things moving for businesses on both sides of the transaction.”
While there appears to be bipartisan support for the legislation, which is expected to receive a vote on Friday in the House, Danner said that members who are still on the fence may be persuaded by the potential for substantial job growth.
“This is important research because it quantifies the benefit in a way that we think is persuasive,” he said. “Every member of Congress wants to encourage more jobs and based on our research that’s a very fair expectation. This is good policy for small business and it’s very good policy for Americans who want jobs and a stronger economy.”
Click here to view the full research report.