Toomey Reaches Across Aisle for Jobs Bill
Efforts in Congress to improve our economy are in danger of being sidelined by the partisan stalemate in Washington. One recently introduced bill would amend the federal tax code by improving cash flow for small businesses, encouraging more investment in profitable businesses, and giving investors an incentive to stay in for the long haul with companies that rely heavily on R&D.
The Start Up Jobs and Innovation Act is the collaboration of the politically unlikely duo of Pennsylvania’s own Republican Senator Pat Toomey and New Jersey Democrat Robert Menendez. At the press conference introducing the bill, Senator Toomey said lightheartedly that the two disagree on a number of policy matters but offered that, "if you want to make progress, you look for areas where there’s agreement."
"This legislation will make it easier to start a new business, easier to expand an existing business, and will make it easier and more affordable for business to comply with an incredibly complicated federal tax code," Senator Toomey said.
The legislation immediately won the backing of the Pennsylvania Manufacturers’ Association, the National Federation of Independent Business, and other leading organizations representing the business community.
"The Toomey-Menendez bill will help businesses better focus on what they do best and what we need the most," said PMA Executive Director David N. Taylor. "Create jobs, encourage investment, and grow the economy."
One provision in the bill will allow investors in firms that rely heavily on research and development to share in the firm’s losses through a partnership permitted under the bill. It can take more than ten years and upwards of $1.2 billion to bring a new innovative technology to market. Emphasizing the need to incentivize investors to fund these projects, a policy expert at the Coalition of Small Business Innovators (CSBI) pointed out that there is, "nothing in the tax code right now encouraging investors to stick around that long."
The legislation also enhances the opportunity for businesses to expand by permanently allowing companies to deduct the first $500,000 in equipment purchases. The tax code contains such a provision now, but it’s due to expire at the end of the calendar year. Without this provision, businesses would only be allowed to deduct a small portion of their costs in the first year, with the remaining amount deducted over a period of many years making it expensive and difficult for a company to grow.
The bill would also:
• Permanently cut taxes for people who make long-term investments in American small businesses. This will let U.S. small businesses attract the investment they need to create jobs and compete in today’s global economy.
• Removes a tax barrier that makes it harder to create a business by doubling the amount of start-up costs entrepreneurs can deduct in the first year. Currently, companies can only deduct the first $5,000 in start-up costs, and amounts above that have to be deducted over the course of 15 years.
Senator Toomey said that the legislation was born in part from his own real life experiences. "I started a chain of restaurants in Allentown in 1990 with two of my brothers," he said. "We used our own savings to fund the start-up costs and worked day and night and eventually created hundreds of jobs in the Allentown and Lancaster regions. So I understand the unique struggles, uncertainties, and risks involved in starting one’s own business. We can make it easier to be innovative," he said.
Supporters of the measure offered that they hope it will become part of a broader corporate tax overhaul efforts—another bipartisan effort. Senate Finance Committee Chairman Max Baucus (D-Montana) and House Ways and Means Chairman Jim Camp (R-Michigan) have been working for months on an effort that would almost certainly include, among other needed changes, a reduction in our corporate income rate, which at 35 percent is the highest in the industrialized world.
"The great thing about the Toomey/Menendez legislation is that you can put it in a little different buckets, including the larger overhaul effort" said one business tax expert. "It has strong bipartisan support so that will appeal to leadership in both houses and it can slip easily into a larger tax code. But we have to break the logjam in Congress."
To view the entire press conference, click HERE.
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In Other News
Toomey – Menendez Legislation and the ‘Valley of Death’ for Innovation
Research and development companies call it the ‘Valley of Death.’ It’s the no-man’s land after the seed money runs out and no new investors are appearing on the horizon.
"Institutional investors and private equity firms are not too keen on investing in pre-revenue firms where the pay off can be years down the road," Katherine Hamilton, Policy Director of the Electricity Storage Association’s (ESA) Advocacy Council. "The firms become in danger, of course, of never realizing a return, which means missing out on all the jobs that would be created."
The Start Up Jobs and Innovation Act would provide enhanced research and development partnerships. By providing an incentive for investors to partner with a young research company, the Start-up Jobs and Innovation Act stimulates research and development investment at the earliest, most-critical stages of a company’s success. The research and development partnership structures allowed by the legislation will lead to long-term investment strategies, which are critical to the success of innovative research.
Jeff Hatfield, President & CEO of Fort Washington-based Vitae Pharmaceuticals, applauded Senators Toomey and Menendez for introducing the legislation. "It’s great, common sense stuff with a proven track record because it’s been done before," Hatfield said. "Some of the biggest most successful firms you see today benefited from a similar provision in the tax code that has since been removed."
Hatfield added that by giving investors an incentive to remain with a project, the firm can then focus on research without the distraction of worrying about where the next investment dollars are coming from.
"We are racking up millions in losses and it’s of no use to anyone. Innovation has led America to the top in the world and this legislation will help keep us there," he said.
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