Monday, November 16, 2009

New Tax Break for Business Could be Good

Despite the bad spin New York Times business columnist Gretchen Morgenson put on a new tax cut for businesses, I believe it actually could be highly beneficial for struggling small businesses. On November 6, 2009, President Obama signed a law enabling businesses of all sizes to carry back current loss from 2008 and 2009 for five years, instead of only two. That means they can offset profits from the boom. This new tax break is tucked into the Worker, Homeownership and Business Assistance Act of 2009. That's the same law that extends unemployment and renews the first-time homebuyer tax credit.

While Gretchen bemoans this action as an unneeded, unwarranted gift to large, lobbying, cash-rich home developers who helped get us into our current financial mess, I feel somewhat differently. Many businesses - mom and pop stores, small contractors, manufacturers and other small businesses that make up the backbone of our country may be getting the cash relief they need to stay in business. That relief will come in the form of a tax refund, after they recalculate past tax bills from years past.

As Ms. Morgenson points out companies can "offset losses incurred in 2008 and 2009 against profits booked as far back as 2004. The tax cuts will generate corporate refunds or relief worth about $33 billion, according to an administration estimate." I will admit that when I first read her column, I was disgusted by such a gift to the already wealthy. But later, after a dinner conversation about it with my husband, I had second thoughts. I realized that this break could be good and could help the recovery, even if it rewards builders who do not plan to build until demand for new homes resumes.

Read the article in the New York Times:

Fair Game
Home Builders (You Heard That Right) Get a Gift
Published: November 15, 2009
Analysts say home builders will be among the biggest beneficiaries of a new tax break.

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