Tax break opens the door for small business spending

By Sarah Kimmel
Monday, June 30, 2003

      What would happen if you saved your company $100,000 this year and implemented the technologies that were previously on the back burner?

      In order to stimulate the economy, the Federal government has made a $320-billion tax relief measure that includes a $75,000 increase in the expensing limits for small businesses (from $25,000 to $100,000), allowing companies to spend more on growing their enterprises.

      “This new tax legislation is very significant. By quadrupling the expense limit for capital purchases, it is giving small customers an opportunity to do what they have wanted to do with their technology investments. Consequently, it will help small customers compete with larger companies,” says Judy Smolski, vice president of marketing, Small and Medium Business, IBM, Denver, CO.

      According to the Small Business Administration, there are 5.7 million small businesses in the Unites States. By quadrupling the expensing limit for capital purchases, Congress is making it easier for small companies to invest in growing their businesses.

      “By IRS definition, before business profits can be retained, they are diluted by income taxes — the first and greatest impediment to capitalizing the growth of a profitable small business. The net benefit for small businesses is that more profits will be available for working capital,” says Jim Blasingame, small business expert and award-winning host of The Small Business Advocate Show.

      IBM intends to benefit from this tax deal as well. Through additional incentives and promotional offers, Big Blue is positioning itself to sell to its smaller customers, many of them iSeries shops.

      “There are a lot of iSeries customers in the position to take advantage of this, but many may not know about it. IBM is excited because this is an opportunity to look at how our technology can help improve these shops, and we are encouraging customers to speak to their tax advisors and take a look at what they are lacking in their shops,” says Smolski.

      While the bill helps small shops better their technology, it also acts for the greater good. Both the economy and the unemployment rate are expected to improve as these millions of small organizations invest in new technology.

      “The impact of the direct expensing provision on the national economy could be huge. According to the Small Business Survival Committee, there are more than 20 million small businesses in America. Even though the tax package allows up to $100,000 of direct expensing for capital items each year, Keating projects that if the average increase in capital spending per small businesses is only $3,000, that would result in $60 billion in annual economic growth,” says Blasingame.

      For more information on these tax cuts for small businesses, see www-1.ibm.com/mediumbusiness/.

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