Bush tax cuts benefit smaller fleets
Jul 1, 2003 12:00 PM, Editorial By Charles E Wilson
A REVIEW of this year's Gross Revenue Report (May 2003 Modern Bulk Transporter) shows that up to half of US tank truck carriers could reap hefty benefits from the tax cut legislation signed into law by President George W Bush on May 28. These carriers are defined as small businesses, according to Small Business Administration (SBA) criteria.
Also meeting the small business definition are many of the wash racks, tank repair shops, owner-operators, and others that support the tank truck industry. These companies are among 23 million small businesses eligible for tax cuts under the Jobs and Growth Tax Relief Reconciliation Act.
Most importantly, the act enables small businesses to depreciate $100,000 in new capital expenditures annually through 2005. SBA has estimated that more than 500,000 companies will directly benefit from this provision. Moreover, the threshold for phasing out expensing is raised to $400,000 — twice the old amount.
In addition, 50% of the cost of new equipment acquired and placed into service after May 5, 2003 and before 2005 can be depriciated in the first year. The remaining half is then written off over the years under the standard depreciation guidelines. Qualifying assets acquired before May 6, 2003 are eligible for a 30% first-year depreciation break.
Other provisions in the act that are designed to help small businesses include the acceleration of the tax cuts enacted in 2001, with the top rate decreasing from 38.6% to 35%, according to the SBA. For most small businesses, the average tax cut would be $2,209.
Stimulation of the sluggish US economy is the objective, and many in the Bush Administration believe small businesses — such as small tank truck carriers — are the key to the effort. It's hoped that the new expensing provisions, in particular, will spur purchases of new trucks, tank trailers, wash systems, and other capital equipment.
“Small businesses are not only the engine that fuels America's economy, they are the first to invest extra revenue or tax relief back into their companies,” says Hector V Barreto, SBA administrator. “By providing accelerated tax relief and increasing the expensing provision, small businesses across the country will be able to buy new equipment, hire additional employees, and grow their businesses. And we believe growing businesses will translate into new jobs and economic revitalization across America.”
Recent news reports suggest that optimism is rising for small businesses, including trucking companies. The IBD/TIPP Small Business Economic Optimism Index rose 10.4 points in the second quarter, to 65. Anything above 50 means optimism on the index's 100-point scale.
The index was up in all categories. Retail made the best showing, with a pick-up of 15 points. Manufacturing added 12.3 points, and finance was up 10.9 points. Business and professional services rose 8.9 points. The greatest small business optimism was found in the south (index level of 67.4) and the west (65.6).
With the consolidation that has occurred among tank truck carriers in recent years, it's easy to forget that the smaller fleets still play a crucial role in the US economy. The same goes for many of the commercial wash racks, cargo tank repair shops, tank leasing companies, and manufacturers that support this industry.
Along with the rest of the 23 million small businesses in the United States, these companies produce nearly 50% of the nation's goods and services. They account for more than 80% of job growth. No group could be more deserving of tax relief.
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