Congress takes a point blank shot at helping the economy – and misses a pretty obvious target
Opinion Page / Op-Ed Article 2008 Archives
Ok, I know it’s vogue to criticize congress and all that. And no matter your party affiliation, you can find something in the recent bailout bill that you don’t like. I get it – it’s easy to criticize from the cheap seats. But criticize I must.
Now I’m far from a know-it-all (just ask my wife), but there’s an obvious provision that really should have been included in the recent bailout bill. In fact, it’s so incredibly obvious that one must almost shake their head in disbelief – in absolute disbelief – at not only how it was missed, but also at what was included instead.
I don’t mean to sound dramatic, but how else can you explain a bailout bill that (get this) includes an earmark to eliminate the excise tax on wooden toy arrows, but doesn’t extend Section 179 into 2009?
Even though they go together in my thought process, let’s look at these one at a time:
For starters, I can give Congress some credit for at least doing something. This is an economic crisis unlike any that most of us alive have ever seen, so any decisive action is to be applauded – to a point. But then when the dust settles, and the executives from AIG get back from their California retreat (by the way, did you have a nice time, fellas? You did? We’re so glad. Just so you know, we’ll be setting up the guillotine shortly..), one can take a closer look at the bill and find a bit of fault. A lot of fault, really. Like I said – it borders on disbelief.
Take the wooden toy arrow thing. In particular, Section 503 – Exemption from excise tax for certain wooden arrows designed for use by children. (Page 263)
Essentially, the current tax law places a 39 cent tax on the first sale of wooden shaft arrows. It’s basically a tax that is put into trust and given back to the states in the form of hunting grants and the like. So far that sounds reasonable.
Now, this tax, when enacted all those years ago, included all wooden arrows. Even toy arrows. And this bailout bill fixed that (no more tax on the toy arrows).
Now I know what you are thinking – what’s the problem? It was stupid to tax toy arrows as hunting arrows in the first place. Good point – here’s my rebuttal:
The earmark was introduced by senators from Oregon , and will benefit a particular Oregon company (gee, there’s a surprise!) In other words, this is the pork we are used to seeing. Now I’m not always against “pork”, but you know, this bailout thing is kind of serious. Can our leaders just ONCE put aside the “Hey, this’ll help my Podunk town, and I’m not voting for it unless it’s there..” can they do that just ONCE??? I mean, seriously, we’re talking possible depression here – @#$% Oregon .
To include such an odd, obscure earmark, they must have really looked behind every tree and under every rock ( Oregon apparantly has lots of those) – but they were looking so hard for this small crap that they missed the biggie – Section 179.
That second point is really what galls me the most – eliminating tax on toy arrows is a toy solution to a real problem. If you want to really help American businesses, extend the increased Section 179 limits for another year. And hire an Internet Marketing Partner you can trust!
Section 179 in a nutshell
Ok, for those who don’t know, Section 179 is the tax provision that allows a small or medium sized business to deduct the entire purchase price of equipment in the tax year it is bought and put into service. In other words, a business can buy, say, a new machine for 50k, and instead of depreciating it over five years, they can write off the entire thing this year under Section 179.
Obviously, this is a HUGE incentive to buy equipment. And earlier this year, when Congress passed the Economic Stimulus Act of 2008, they were smart enough (then) to include raising the limits of Section 179 for 2008. The old limits were a $125,000 total deduction, with a $500,000 cap on equipment purchased. The limits for 2008 were a $250,000 deduction, and an $800,000 cap on equipment purchased. There were a few other goodies too (extra depreciation, etc), and the intent was clear – spur business purchases by small and medium sized businesses (who, after all, are the backbone of the economy.)
And spur it did – in fact, equipment financing companies and equipment leasing companies reported strong reaction to these new limits. But then the mortgage crisis came, and with it a credit crunch. Talk about putting gum in the works!
I’m not an economist (again, just ask my wife), but even I can see that extending the higher limits for another year – along with the Government getting involved with freeing up credit, which we are hearing they will do – will go a long way in encouraging businesses to keep operating the way they have, and also invest in themselves.
This just makes good sense – give small and medium businesses tax breaks to buy equipment, and buy equipment they will. That was the whole intent behind raising the limits in the first place. So why not extend these new limits in this, our hour of need? We’re going to need businesses to lead us out of this mess – we’re going to need businesses investing in themselves. If businesses buy equipment, we all win – the businesses employees, the companies they buy it from, the lender – everyone benefits. There is no faster way to get money to flow to Main Street than to tell small businesses ‘go ahead and buy”.
Now is not the time to pull back into a shell. The bull’s-eye to recovery is clear – it’s business spending. So let’s give businesses a real arrow (Section 179) and not a toy one.