Small businesses create most of the jobs in America. But since the 'Great Recession' began in December 2007, over 6 million of those small business jobs have been lost. The Small Business Jobs Act signed into law by President Obama in September 2010 includes both temporary and long-lasting provisions that aim to help create 500,000 new jobs through three main objectives: providing small businesses access to capital, encouraging investment and promoting entrepreneurship.
The recent financial crisis has dried up most credit sources for small businesses in the United States. The Jobs Act primary goal is to increase access to capital for small businesses, so they can grow, hire and thrive. One major feature of the Jobs Act is the creation of the Small Business Lending Fund, which will provide $30 billion to small community banks for them to make loans to small businesses - including performance-based dividend rates that incentivize them to in fact lend. The Small Business Jobs Act also extends the Small Business Administration (SBA) Recovery loan provisions and increases SBA loan limits (the later should increase small business lending by an estimated $5 billion in the first year alone). Furthermore, the Jobs Act eliminates borrower fees on some SBA loans to make them more affordable for small businesses and provides relief to microloan intermediaries and Women's Business Centers.
Additionally, the Small Business Jobs Act reduces the tax burden on small businesses through $12 billion in tax cuts. These tax cuts include:
- zero taxes on capital gains from small business investments (if those investments are held for five years)
- the expansion of the amount of investments small businesses are able to write off
- the extension of "bonus depreciation," which allows small businesses to immediately deduct 50% of qualifying expenditures
- the ability for business owners to deduct the cost of health insurance for themselves and family members when calculating their self-employment taxes
- the removal of cell phones from "listed property," which makes it easier for their cost and depreciation to be deducted
- the modification of tax penalties aimed at punishing large corporations and wealthy individuals for hiding assets in tax shelters, which had disproportionately affected small businesses
- an increase in the deduction of start-up expenditures, and
- the allowance for small businesses to "carry back" general business tax credits to offset five years of taxes and their Alternative Minimum Tax (AMT) liability.
The Small Business Jobs Act also contains a handful of provisions that aid and promote the exportation of U.S. goods - including through the improvement of the Small Business Administration's (SBA) trade and export finance programs and the creation of the State Export Promotion Grant Program (STEP), which aims to increase the number of small businesses that export goods abroad. This legislation is expected to leverage over $1 billion in export capital for small businesses and generate or save up to 40,000 to 50,000 jobs in its first year alone.
The Small Business Jobs Act also addresses U.S. government contracts, which often are won by large, multinational corporations. It aims to enable small businesses to win more government contracts by closing loopholes, removing red tape and clarifying that no single contracting program receives priority over another when competing for federal contracts. The Jobs Act also demands accountability for prompt payment from large business prime contractors to small business subcontractors. The U.S. government estimates that increasing the number of contracts that go to small businesses by just 2% will generate over 60,000 jobs.
For more information on the Baucus, Landrieu Small Business Jobs Act, please refer to the United States Senate Finance Committee's legislation page for the Small Business Jobs Act, which includes a PDF Summary of the Small Business Jobs Act.