STATEMENT
of the
Honorable Nydia M. Velazquez, Chairwoman
United States House of Representatives, Committee on Small Business
Full Committee Hearing: ““Tax Extenders: How to Ensure Small Business Growth and Continue Economic Recovery”
September 30, 2009  

 

Targeted tax relief has played a key role in our nation’s recovery efforts. Since February, we’ve worked to deliver $15 billion in credits and deductions to entrepreneurs. These measures are ensuring every small firm has the tools it needs to grow from within. When coupled with existing incentives, like tax extenders, Recovery Act tax relief has created real momentum.   But with expiration dates looming, many of these provisions will soon run out, putting the breaks on much of our progress thus far.

In roughly two months time, a wide range of tax provisions--from R&D credits to clean energy incentives-- will sunset for small firms. In today’s hearing, we will examine those measures. In doing so, we will look for ways to ensure effective efforts are continued, and ineffective ones are either allowed to sunset, or enhanced to spark growth.  

Whether we’re talking about home office deductions or bonus depreciation for equipment purchases, entrepreneurs rely on tax measures to expand their ventures. This is the case in both bad times and good times, but rings particularly true in today’s economy.  For small firms facing tightening credit and shrinking capital, incentives can make all the difference.  In some instances, they are a deciding factor for things like hiring workers and making investments. That’s why targeted relief is so important, and that’s why we need to be reauthorizing measures that work for small firms.     

There are a number of valuable, soon-to-expire tax extenders. Perhaps the best example is the R&D credit, an incentive that has been reauthorized 13 times since 1981. This provision yields $2 in research for every $1 in investment, and helps create high-wage jobs for workers like engineers and scientists. Yet despite its obvious economic benefits, the R&D credit is slated to expire in December, leaving countless small firms in the lurch.

The R&D credit is just one example of an effective--but endangered-- tax provision. Reauthorizing these credits could ease the anxiety associated with last minute extensions. It could also provide small firms with the stability they need to plan budgets and attract investment. In that same vein, extending certain Recovery incentives could also go a long way in stimulating small businesses.

While not considered “extenders” in the traditional sense, Recovery Act tax breaks are also set to expire. These incentives were designed to boost consumer spending and spur investment.  Credits for first time home buyers, for example, are sparking growth in the real estate and construction industries. The $8,000 incentive has already contributed to a rebound in the housing market--one that some experts say could drive an additional 400,000 home sales this year. Reauthorizing this particular provision would undoubtedly stimulate future growth. Failure to do so, however, could create greater uncertainty in the marketplace, and dampen recovery for small businesses.  

Entrepreneurship is an inherently high-risk, high-reward endeavor-- one that is often characterized by uncertainty. Since the beginning of the downturn, that uncertainty has been compounded. Now, more than ever, small firms need stability and incentives to grow. But unfortunately, the lack of finality in our tax policy may be undermining these very goals.  As we look for ways to strengthen small businesses, we need to be focused on the tools that are already sparking progress. By extending and expanding these measures, we can give small firms the certainty they need to make new investments, and the encouragement they need to help grow our economy.