Small Business Tax Preferences: Significant Legislative Proposals in the 110th Congress (CRS Report for Congress)
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| Release Date |
Revised June 7, 2007 |
| Report Number |
RL32275 |
| Report Type |
Report |
| Authors |
Gary Guenther, Government and Finance Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
Some policy issues seem fixed on Congress's legislative agenda. One such issue is the taxation of small firms and its effects on their formation, performance, and growth. In the view of some lawmakers, the current federal tax burden on small firms, though smaller than it could be because of existing small business tax benefits, should be reduced further because it hinders their formation and retards their growth. Others find it difficult to justify on economic grounds additional tax relief for small business owners.
The federal tax code offers numerous benefits of varying importance to small firms, regardless of their lines of business. Most of these benefits take the form of deductions, exclusions and exemptions, credits, deferrals, and preferential tax rates.
A growing number of proposals to expand certain existing small business tax preferences, or create new ones, have been introduced in the 110th Congress. Several related bills are worth noting because they played a central role in congressional approval of legislation to increase the federal minimum wage.
Early in the current Congress, the House and Senate passed differing versions of legislation (H.R. 2) to raise the federal minimum wage from $5.15 to $7.25 over two years. The House version included no tax benefits intended to soften the impact of the increase on the financial condition of small firms, whereas the Senate version contained a set of such benefits and a package of revenue raisers intended to offset their revenue cost over 10 years.
With negotiations over moving to a conference on minimum wage legislation stalled, the House passed on March 23 a FY2007 supplemental appropriations bill (H.R. 1591) that included the minimum wage provisions from H.R. 2 and the business tax benefits from a bill it approved in February (H.R. 976). The Senate responded by passing an amended version of H.R. 1591 on March 29 that included the same minimum wage increase and an expanded version of the business tax benefits from H.R. 2. Differences between the two versions of H.R. 1591 led to the formation of a conference. A conference report (H.Rept. 110-107) was filed on April 24 that combined a set of business tax benefits with a package of revenue raisers intended to offset their estimated 10-year revenue cost of $4.8 billion. The House approved the report on April 25, and the Senate did likewise the next day. But President Bush vetoed the bill on May 1, mainly because it included a timetable for removing U.S. combat troops from Iraq that he opposed.
The House and Senate then passed a second FY2007 supplemental appropriation bill (H.R. 2206) that omitted any such timetable but contained the same business tax benefits and revenue raisers. President Bush signed the measure on May 25.
This report describes significant proposals in the 110th Congress to create new tax benefits for small firms across all industries, or to enhance existing such benefits. It will be updated to reflect recent legislative activity.
