This fall represents an opportunity for our lawmakers to refocus their attention on how to grow the nation’s economy. One area that has not gotten the attention it deserves during our economic recovery is America’s cumbersome tax code and the exceedingly high tax rates on the very businesses that must grow in order to put people back to work. At over 4 million words and 9,000 pages, our unwieldy tax code touches every aspect and sector of the U.S. economy. From multibillion dollar corporate giants to small tech startups, the tax code has become way too complicated and stuffed with disincentives for business growth. It’s time Congress stepped in to fix it – once and for all.
While disagreements over broad tax reform have become a mainstay of Washington politics, Congress has enacted “tax extenders” legislation since the 2008 recession that has had a positive impact on small, medium and large businesses alike. One of those so-called extenders, Bonus Depreciation, has helped spur job growth and business development in California and elsewhere. It does this by giving companies the right to expense half of the total amount they spend on capital investments in the year those investments occur, thereby increasing their cash flow and providing them with an increased incentive and ability to make capital investments.
Take our company as an example. We make a large variety of Internet home networking products (such as modems, routers, and network extenders, among others). We sell our products to the telephone companies and cable TV companies that provide Internet service to consumers. Growing demand for Internet service as well as rapid changes in Internet speeds and technology require our customers to make sizable capital investments in their Internet business on a continuing basis. Bonus depreciation increases their incentive and ability to make these investments in a timely way, which in turn is crucial to our ability to grow our business by selling more products.
Unfortunately, however, the Bonus Depreciation law contains a sunset clause. Unless renewed by the end of this year, it expires automatically. It has been renewed previously on several occasions for one and two year periods, and I encourage California’s Congressional delegation to support renewal once again this fall before it expires. Doing so will not only spur growth in California’s technology sector but also will increase small business competition around the country.
Importantly, progress in Washington on this issue is promising. Before it began its summer recess in early August, the Senate Finance Committee passed a $97 billion tax package that would renew Bonus Depreciation. As Congress returns to work, it’s imperative Congressional leadership in the House and Senate bring this important legislation to the Floor for a vote – California’s small businesses are counting on it.
