Small Business Group Responds to President Obama's State of the Union

/PRNewswire -- In response to President Barack Obama's State of the Union address, the nation's leading organization dedicated to promoting entrepreneurship and protecting small business issued the following response:

"Entrepreneurs are heartened to hear that President Obama wants to make the U.S. the best place on earth to do business. Indeed, across the globe, nations are cutting taxes, simplifying their tax systems and reducing regulations to make it easier to start up and grow a business. Developed and emerging countries alike have quickly adapted to the competitive environment and are reaping rewards in their aggressive efforts to attract capital and business investment. President Obama has awoken to this realization, and mere rhetoric alone will not change the competitive dynamic. Entrepreneurs and investors must now see dramatic changes on the policy front. This means, immediately locking in a pro-growth tax system, restraining the regulatory tide that is sweeping over every sector of our economy and reducing government spending," said Small Business & Entrepreneurship Council (SBE Council) President & CEO Karen Kerrigan.

SBE Council chief economist Raymond J. Keating added: "While the President's pro-business rhetoric is encouraging, other specifics in his speech were disappointing. First, his explicit call for a tax increase on upper-income earners showed that he still fails to grasp that such a tax hike on entrepreneurs and investors would be bad for the economy. Second, his call, in effect, for higher taxes on oil companies in order to subsidize other energy sources reveals a desire for politics to overrule markets, with the result being higher costs in the end. And third, he took one step forward on trade, by urging Congress to approve the South Korea trade deal, but two steps back by failing to push ahead now with the Panama and Colombia accords."

Kerrigan concluded: "We look forward to working with President Obama and Congress in the critical areas of reducing regulation and simplifying the tax system. Leadership and action are desperately needed on these issues if the U.S. is to become more competitive in the global economy. Furthermore, small business owners have substantive ideas for improving the health care overhaul bill that was enacted into law. We only hope the Administration will listen to our solutions this time around."

SBE Council is a nonpartisan, nonprofit advocacy and research organization dedicated to protecting small business and promoting entrepreneurship. For more information, please visit: www.sbecouncil.org .

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Taxing the Internet

Remember the days when state taxes were not paid when you ordered that favorite item online?  It seems like times are changing.  How soon before all states tax the internet?  What do you think about this?

Internet Tax Bill Passed in Illinois

/PRNewswire/ -- The Internet Tax Bill (HB 3659) was passed in the Illinois Senate on January 5, by the House of Representatives on January 6 and brought to the Governor, who may sign it into a law as early as Friday, January 7.

The tax legislation relates to out-of-state merchants like Amazon.com and Overstock.com that do not have a physical presence in Illinois but have relationships with Illinois advertisers and publishers like CouponCabin.com. By this law, these merchants are deemed to have a presence (nexus) in Illinois and are therefore required to collect Illinois sales tax.

The goal of this is to increase tax revenue for the state, but what has happened in the four states that have passed similar laws (New York, Colorado, North Carolina and Rhode Island) is that instead of collecting sales tax, these merchants have severed their relationships with publishers in that state. Twelve other states have rejected similar legislation.

Statement from Scott Kluth, Founder and President of CouponCabin.com:

"Needless to say, we are disappointed by the passing of the legislation today. It was disheartening that both Houses passed this bill in 30 hours without a full and fair opportunity for the voice of Illinois small businesses to be heard. CouponCabin has been rapidly growing for the past several years; in fact, in November, we were only 12% behind Groupon's monthly traffic. For the third straight year, our staff has doubled in size and has already grown by 12% in the first week of 2011. Unfortunately, this bill will do significant harm to our growth by cutting our business by nearly one-third. Chicago has been an amazing home for CouponCabin for more than seven years. We are grounded in the community with our business and our charitable work and have no plans to leave. We hope the State will see that this bill will fail to achieve its revenue-raising goal, and instead cause drastic hardship for small businesses like ours. We know from other states' experience that the tax revenue does not materialize. Should this bill become a law, Internet affiliate jobs will be lost with no increase in state revenue. The other states that have passed this are moving to repeal it for this exact reason. We hope consideration will be given to the impact on small businesses before this bill becomes a law."

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Congress Should Stimulate Economy With $500 Billion in Private Investment By Temporarily Reducing U.S. Business Taxes on Foreign Earnings

/PRNewswire-USNewswire/ -- The quest for cash to jumpstart the ailing U.S. economy could be alleviated if congress would revisit the 2004 successful economic stimulus measure that enabled U.S. businesses to invest $360 billion of foreign earnings at a temporary, reduced tax rate of 5.25%. In a new study commissioned by the American Council for Capital Formation (ACCF), renowned economist Dr. Allen Sinai of Decision Economics, Inc. analyzed the benefits that would occur based on an estimated $545 billion of repatriations, similar to the 2004 American Jobs Creation Act (AJCA). Sinai concludes that the U.S. economy would see a substantial boost in investment in plants and equipment and R&D, leading to higher U.S. GDP and job generation. He also projects nearly $140 billion in tax revenue over five years for the U.S. Treasury - money it would not otherwise receive.

"Unlike many of the stimulus proposals that bear a high price tag, this is a virtual free lunch that congress, the new administration and taxpayers can easily digest," said ACCF President and CEO Mark Bloomfield. "This temporary tax reduction can provide a lift to the U.S. business sector, significantly improve the financial position of nonfinancial corporations, and help relieve the tight credit and liquidity restraint for a number of companies."

Sinai's quantitative study concludes that temporarily reinstating an 85% dividends-received-deduction for repatriated foreign subsidiary earnings would lead to the following economic benefits:

-- Increased U.S. GDP, peaking at an additional $110 billion in 2010
-- Reduction in outstanding debt, which would improve credit availability
-- An average annual increase of $56 billion in new investment over the
next 5 years
-- Increased U.S. R&D spending by approximately $7 billion per year over
the next five years
-- Job generation within the U.S. economy peaking at 614,000 in 2011
-- Nearly $140 billion in tax revenue over five years from initial cash
investment and residual economic activity


ACCF also pointed to a survey of U.S. companies that utilized the 2004 AJCA and found, on average, that 25% of the funds repatriated were used for U.S. capital investment, 23% for hiring and training of U.S. employees, 15% for U.S.-based R&D, and 13% for U.S. debt reduction. Another survey indicated repatriating companies increased their total investments in the United States by over $230 billion compared to prior years.

"This temporary tax reduction would provide much needed cash flow for capital spending, R&D, strengthening corporate balance sheets, new jobs and produce gains for the overall economy," said ACCF Senior Vice President and Chief Economist Margo Thorning. "This is a true win-win alternative to placing further strains on the federal budget and Federal Reserve."

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