Washington Watch
May 21, 2001
Senate Vote on Tax
Cut Package Expected This Week
This week in Congress the Senate is working toward
final passage of the $1.35 trillion, 11-year tax cut
bill. An alliance of Republican and Democratic
Senators have blocked an array of amendments that
would have expanded the tax package (H.R.
1836) by adding additional tax cuts or altering
the combination of proposed reductions.
The central concern regarding the tax package is the
debate on the reduction of income tax rates. The
legislation the Senate is currently deliberating could
face significant changes when it is reconciled with a
House bill that seeks greater rate reductions. The
House bill coincides with President Bush's request to
reduce the top rate of 39.6 percent to 33 percent by
2006. The Senate bill would reduce the top rate to 36
percent by 2007.
Both chambers agree on estate tax repeal to be phased
in by 2011. Marriage tax relief is also part of both
packages. However, the House bill (H.R.
6) would give married couples relief, beginning
2002 while the Senate would not implement it until
2005.
House Small Business
Committee Holds Hearing on SBA Budget
The House
Small Business Committee held a hearing on
Wednesday, May 16, 2001 to discuss the hotly contested
2002 Budget for the Small
Business Administration (SBA). The budget released
by President George W. Bush earlier this year cut the
Small Business Administration's budget by 40 percent,
from $900 million to $540 million. The Bush budget
adds new fees under the 7(a) Loan Guaranty Program and
the Small Business Investment Company program, SBA's
two largest loan programs. As a result, small
businesses will pay an additional $1,400 to $2,800 for
an average 7(a) loan. Also, Small Business Development
Centers, which deliver educational and technical
assistance to current and prospective small business
owners, will have to impose new fees on counseling and
training services.
SBA’s Acting Administrator, John D. Whitmore, Jr.,
testified before the House Small Business Committee
and fielded many heated questions and remarks by
committee members. Mr. Whitmore’s testimony
discussed some of the programs that would lose funding
in 2002 due to the budget cuts. The Program for
Investment in Microentrepreneurs (PRIME), which allows
the SBA to issue Federal grant awards to qualified
organizations for the purpose of providing training
and technical assistance to disadvantaged
microentrepreneurs would be discontinued in 2002. In
addition, the New Markets Venture Program would also
be discontinued in 2002. Also, The Business Learning,
Innovation, Networking and Collaboration (BusinessLINC)
program designed to create and foster mentor-protégé
relationships that would promote the growth of small
businesses by matching them with larger ones would no
longer be funded.
Rep.
Nydia Velazquez (D-NY), Ranking Member of the
House Small Business Committee, has been extremely
vocal about the SBA budget cuts, “This is a bad
budget and it will be bad for small business. Without
a reasonable budget plan, we are placing America’s
economic foundation ---and the key to future
prosperity---at risk of failure.”
An attempt to restore funds to the SBA budget has
occurred by means of an amendment to the Budget
Resolution. The non-binding Budget Resolution sets
spending and revenue guidelines for a decade and
serves as a blueprint for the 13 appropriations bills
in fiscal 2002. Ranking Member of the Senate Small
Business Committee, Sen.
John Kerry (D-MA) sponsored an amendment to the
Budget Resolution, which has passed both the House and
Senate. The amendment would increase SBA funding by
$264 million to fund programs that provide loans and
business assistance to small businesses. The Kerry
amendment also restores or adds $166 million for 7(a)
loans, Small Business Investment Companies, Microloans
and New Markets Venture Capital funding. The amendment
additionally provides $98 million for critical
programs such as:
Also cosponsored by Chairman
Christopher Bond (R-MO) of the Senate
Small Business Committee, the Kerry amendment
works to eliminate many of the Bush Administration's
proposals to increase taxes on certain small
businesses by raising fees on small businesses that
need 7(a) guaranteed business loans for operating
expenses. Ultimately, the amendment would restore most
of SBA program funding. However, it is uncertain
whether the restoration of funds will be evident in
the final appropriations bill.
House and Senate
introduce Independent Contractor
Determination Act of 2001
Chairman of the Senate
Small Business Committee, Senator
Christopher Bond (R-MO) and Chairman
Donald Manzullo (R-IL) of the House
Small Business Committee have introduced S.837
and H.R.
1783, the Independent Contractor Determination Act
of 2001. The bill would improve compliance among
independent contractors and addresses concerns about
permitting individuals who provide their services
through their own corporation or LLC to qualify as
independent contractors. The Independent Contractor
Determination Act has three requirements to improve
compliance: “(1) there must be a detailed, written
agreement between the parties, (2) the new rules will
not apply if the service recipient does not comply
with the reporting requirements and issue 1099s to
individuals who perform services, and (3) an
independent contractor operating through her own
corporation or LLC must file all required income and
employment tax returns in order to be protected under
the bill.” (Congressional Record)
Senator Bond strongly asserts that the “Independent
Contractor Determination Act is a common-sense measure
that answers the urgent plea from independent
entrepreneurs and the businesses that engage them for
fairness and simplicity in the tax law.” Both the
Senate and House legislation are currently in
committee for review.
Click
here for the complete text of Senator Bond's
remarks in the Congressional Record.
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