A Bright Idea on Taxes

Anew idea in Washington has more trouble gaining traction than the city’s commuters on icy streets. While there will be pitched battles over accelerating tax-rate reductions and eliminating the tax on stock dividends, lawmakers agree on the need to help small businesses. Unfortunately, the most elegant way to help the most promising entrepreneurs will be ignored unless the Bush administration and Hill leaders give it the attention it deserves.

The BRIDGE Act (Business Retained Income During Growth and Expansion) is the brainchild of Washington outsiders with vast business know-how. They have persisted in promoting their novel plan, despite a chilly reception by insiders who lack an understanding of the problems faced by entrepreneurs. The BRIDGE Act would permit a profitable, promising small business, with $ 10 million or less in gross receipts, to defer up to $250,000 in federal income taxes for two years, and pay the taxes owed with interest over the next four. The deferred tax amount would be placed in a trust account to be used as collateral for a loan. The idea is to help businesses during a critical time in their growth when outside financing is difficult and costly to obtain. In making their case, the bill’s sponsors point to an estimate that such a tax deferment would create over 640,000 jobs in its first three years. According to the Joint Tax Committee, allowing small businesses to retain their profits temporarily, thereby “bridging” their funding gap, would “cost” government several billion dollars in tax revenue in the early years, but would result in a $ 1.1 billion net revenue gain over a ten-year period.

About the Author

Kate O'Beirne

Anew idea in Washington has more trouble gaining traction than the city’s commuters on icy streets. While there will be pitched battles over accelerating tax-rate reductions and eliminating the tax on stock dividends, lawmakers agree on the need to help small businesses. Unfortunately, the most elegant way to help the most promising entrepreneurs will be ignored unless the Bush administration and Hill leaders give it the attention it deserves.

The BRIDGE Act (Business Retained Income During Growth and Expansion) is the brainchild of Washington outsiders with vast business know-how. They have persisted in promoting their novel plan, despite a chilly reception by insiders who lack an understanding of the problems faced by entrepreneurs. The BRIDGE Act would permit a profitable, promising small business, with $ 10 million or less in gross receipts, to defer up to $250,000 in federal income taxes for two years, and pay the taxes owed with interest over the next four. The deferred tax amount would be placed in a trust account to be used as collateral for a loan. The idea is to help businesses during a critical time in their growth when outside financing is difficult and costly to obtain. In making their case, the bill’s sponsors point to an estimate that such a tax deferment would create over 640,000 jobs in its first three years. According to the Joint Tax Committee, allowing small businesses to retain their profits temporarily, thereby “bridging” their funding gap, would “cost” government several billion dollars in tax revenue in the early years, but would result in a $ 1.1 billion net revenue gain over a ten-year period.