Effects of Tax Cuts on Small Businesses Uncertain

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Barbara Kasoff

(WOMENSENEWS)–President Bush’s new tax-cut law, the Jobs and Growth Tax Reconciliation Act of 2003, has been well-received by trade groups that represent the approximately 9.1 million U.S. women who own small businesses and together generate $3.6 trillion in annual revenue.

Women Impacting Public Policy, based in Oklahoma City, fully applauds the taxlaw, passed in May. WIPP president Terry Neese, who met with President Bush to advise him on economic incentives for small business, said, “WIPP members worked extremely hard on this tax package that brings immediate cash flow to small businesses.”

Barbara Kasoff, vice president of Women Impacting Public Policy, added that the provisions will help level the playing field for small businesses. Many small businesses are small proprietorships–single-owner businesses such as beauticians or caterers–that report revenue as personal income. Before the new tax law, the highest individual tax rate was 38 percent, but the highest rate for corporations was only 35 percent.

Erin Fuller, executive director of the National Association of Women Business Owners, an organization with 80 U.S. chapters, said the tax cuts, especially the increased expense deductions, will help small businesses expand and create more jobs.

Treasury Department Says Law Will Aid Small Business

The Treasury Department reported that the law intends to increase cash flow to small businesses by accelerating their tax deductions enacted in the 2001 tax cut–an estimated $2,209 average tax cut for 23 million small business owners; increasing annual limits in expense deductions from $25,000 to $100,000; lowering the top tax rate income to 35 percent from 39 percent and simplifying tax record-keeping methods for depreciation.

In contrast to the Treasury Department’s figures, the Urban-Brookings Tax Policy Center in Washington, D.C., finds that nearly 83 percent of small businesses will get lower than the average $2,209 tax cut amount estimated by the Treasury, and that 36 percent of them will receive less than $100. The Urban Institute’s analysis indicates that because the Treasury Department averages are skewed by the large cuts going to a small number of high-income taxpayers, its method of averaging is deceptive.

Some observers see little good for women–even for those who own small businesses–in the effects of the law.

Joan Entmacher, vice president and director of Family Economic Security at the National Women’s Law Center, said, “That this plan helps small business is vastly overstated.” Entmacher argued that the small-businesses that will benefit from the bill are those in a high-income category, few of which are owned by women.

The Small Business Administration studies indicate that 87 percent of women’s sole proprietorships are quite small with receipts less than $50,000. Entmacher said many women–beauticians, typists, caterers–build a very small business around their own particular skills.

“Women with low incomes are the ones who will pay the price for this new law. These women rely on Medicare and Social Security,” said Entmacher. “Women are also the ones who care more deeply about education for their children and cutbacks are being made on that as well.”

Low Income Tax Payers Will See Little Benefit

Max Sawicky, an economist at the Economic Policy Institute in Washington, D.C., explains that since the tax cut is a regressive tax cut, those with low-incomes–entrepreneur or not–will not be receiving the lion’s share of the benefits.

Aside from the small-business provisions, other aspects of the new law are also inciting broader objections about the effect on women. Critics say that the tax cut on stock dividends will benefit mostly the rich with large stock-market investments. Meanwhile other tax cuts for lower-income people will be trifling and are bound to be offset by funding cuts to social services that many single working women depend on, such as child care and Social Security.

Jennifer Sweeney, director of public policy at Business and Professional Women/USA, based in Washington, D.C., was divided about the new law and wished that it emphasized job creation rather than additional tax cuts.

“We were happy with the small-business provisions and we know that business and professional women will benefit from the stock dividend tax cuts,” she said, “but we are concerned that the dividend tax cuts will put money in the hands of wealthy individuals who are less likely to spend that money. We are also concerned about the looming implications on the programs that aid women and children.”

When asked about the detrimental effects the new bill will have for social services and the women who rely on them, Women Impacting Public Policy’s Kasoff responds, “These problems need to be solved in other ways. They don’t have to do it off the backs of small businesses.

“Many women business owners are single working mothers–we are always cognizant of that–but we believe that you have to address the issue on its merits,” added Kasoff. “We try to look at it from a bottom line approach–what does it mean for our pockets? Small businesses are fueling the economy and data show that small businesses will profit.”

Samantha Xu is a Women’s eNews intern.

For more information:

Women Impacting Public Policy:
http://www.wipp.org

National Women’s Law Center:
http://www.nwlc.org

U.S. Small Business Administration Women’s Business Ownership:
http://www.sba.gov/financing/special/women.html


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