STATEMENT
of the
Honorable Nydia M. Velázquez, Chair
House Committee on Small Business
Full Committee Hearing: “Bonus Depreciation: What It Means for Small Business”
July 14, 2010, 1 p.m.

Today’s hearing comes at a critical time for the US economy. June marked the sixth month in a row that private sector jobs increased. Also, GDP has risen over three straight quarters -- after shrinking for 6 consecutive quarters. Despite these positive signs, unemployment remains unacceptably high.

Small businesses will be critical to putting Americans back to work. With business activity picking up, we need to continue finding ways to promote entrepreneurship and investment. Last month, the House passed legislation aimed at steering tax relief to small businesses and promoting the flow of capital to our nation’s entrepreneurs. The Senate is expected to consider its own small business jobs bill, shortly.

As Congress completes a final package, there will be a lot of debate on which policies will best create jobs. One of those issues will be extending bonus depreciation. The Senate bill contains an extension of the 50% bonus depreciation tax deduction, while the House version does not.

Bonus depreciation allows a business to take a 50% deduction for investments in new manufacturing equipment, office equipment, and other capital expenditures. This policy lapsed at the end of 2009.

Today’s hearing will focus on the impact of bonus depreciation on small businesses. We all know that bonus depreciation can help boost economic activity. However, it is also important to recognize what it means for smaller firms.

The witnesses appearing today are small businesses in a range of sectors. They will offer insight on how bonus deprecation affects them and their industries.

To many of the businesses here, bonus depreciation has an enormous impact. It increases cash flow and encourages investment, while spurring expansion.

Bonus depreciation also yields indirect economic benefits for small businesses. While small firms may not always purchase million dollar machines, they see new opportunities when corporations make investments. Small businesses often sell, manufacture, ship or service big-ticket items that large companies purchase using bonus depreciation.

This is the kind of economic activity we need to foster widespread job creation. As noted in the 2010 Economic Report of the President, a true recovery from the current recession will be driven by business investment. This just underscores why bonus depreciation is necessary -- and why it has generated $10 to $20 billion in purchases, while helping sustain or create 100,000 to 200,000 jobs.

Today’s hearing will give Committee Members the chance to consider all these benefits. It will provide the perspective of small businesses and what bonus depreciation means for their industries.

I’d like to thank today’s witnesses in advance for their testimony. Your testimony will be an invaluable part of the process as we move tax legislation with the ultimate goal of creating more jobs.

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