FOR IMMEDIATE RELEASE: April 18, 2012
SCHUMER INTRODUCES NEW LEGISLATION TO GIVE TAX BREAKS TO UPSTATE NY BUSINESSES THAT BUY NEW EQUIPMENT AND HIRE NEW WORKERS – BUSINESSES THAT INVEST AND HIRE COULD SEE HUNDREDS OF THOUSANDS IN SAVINGS
Schumer-Backed Bill Would Provide A Tax Credit Worth 10% of New Salaries For Additional Workers Hired Or Raises Given – Typical Business Could Save Tens of Thousands of Dollars And Hire Many New Workers
New Legislation Would Also Allow Companies That Invest In Capital Equipment To Write Off 100% of The Expense On Their Taxes This Year
Schumer Releases County-By-County Report Of Average Tax Savings Per Worker Hired For Upstate Businesses – $4,700 In Tax Savings Per Worker Hired In Hudson Valley, $3,900 In Southern Tier, $3,700 In Western New York
Today, U.S. Senator Charles E. Schumer announced that he is backing new legislation to spur growth and job creation at small businesses throughout Upstate New York. The bill that Schumer supports, the Small Business Jobs and Tax Relief Act of 2012, would allow businesses to write off 100% of the expense of purchasing new capital equipment in 2012. It would also allow businesses to receive a tax credit of 10% of new workers’ salaries, providing an incentive for companies to hire this year. Companies can receive tax credits worth up to $500,000 depending on the number of workers hired and the salaries that are paid. The bill rewards investing in new machinery, equipment, and workers by reducing the overall tax burden on businesses throughout Upstate New York.
“Businesses that grow and create jobs in the heart of Upstate New York should be rewarded with lower tax bills,” said Schumer. “That’s exactly what this legislation does. It rewards innovators and entrepreneurs who put their profits back into their business and into hiring new workers in good-paying jobs. Tax relief to spur job creation should be a bipartisan no-brainer, and I’m going to work hard to see this bill passed. We’re making some progress creating jobs, but the Upstate economy is crying out for more. This is just what the doctor ordered.”
The Small Business Jobs and Tax Relief Act of 2012, introduced by Senator Harry Reid, encourages business investment and growth in a number of ways, including the ability for businesses to write off, or depreciate, the entire cost of major purchases made this year. Generally, business expenses can be written off during the same tax year in which the purchase is made, but major purchases including equipment and buildings must be written off over many years. Current law means that tax savings from major investments in the business are deferred for a number of years, making it tougher for businesses to hire additional workers or grow the business. The bill that Schumer supports would allow companies to write off the entire purchase in the year that it was made. Accelerating this time frame lowers the after-tax costs of new equipment and machines, making these purchases affordable.
Under current law, if a manufacturer were to spend $750,000 on capital investments this year to add an additional production line, the business would be eligible to write off $375,000 of those costs this year but required to spread out the remaining fifty percent of investment expenses equally over many years. Under this proposal, that business will now be able to write off the full $750,000 investment from their taxable income in 2012. This proposal will reduce small businesses average costs of capital across all investments by more than 75% according to the Department of Treasury. What’s more, every $1 of tax cuts devoted to accelerated depreciation generates about $9 of GDP growth.
This small business jobs proposal would also create a new incentive to help small businesses add jobs this year. Specifically, Schumer’s proposal would make a 10% tax credit available to employers for new payroll in 2012. For example, if an optics firm in Rochester added 30 positions each paying $50,000, that company would see their tax bill for 2012 decrease by $150,000 alone. This portion of the proposal is targeted at truly small businesses across the state and the country, by capping this benefit of the credit at $500,000 per employer.
Businesses would receive a tax credit for 10% of any payroll expansion achieved in 2012 up to $500,000. Based on the average wage in each region of the state, here is how the average tax benefits break down, per employee hired.
· In the Capital Region, where small businesses make up 93% of all businesses, employers would receive an average tax break worth $4,013 per new employee hired
· In Western New York, where small businesses make up 93% of all businesses, employers would receive an average tax break worth $3,702 per employee hired
· In the Rochester-Finger Lakes Region, where small businesses make up 91% of all businesses, employers would receive an average tax break worth $3,725 per employee hired
· In the Southern Tier, where small businesses make up 91% of all businesses, employers would receive an average tax break worth $3,968 per employee hired
· In Central New York, where small businesses make up 92% of all businesses, employers would receive an average tax break worth $3,745 per employee hired
· In the Hudson Valley, where small businesses make up 96% of all businesses, employers would receive an average tax break worth $4,717 per employee hired
· In the North Country, where small businesses make up 93% of all businesses, employers would receive an average tax break worth $3,559 per employee hired
Leading economists like Mark Zandi as well as the non-partisan Congressional Budget Office have endorsed hiring incentives like this as an effective way to spur economic growth and payroll expansion. The Congressional Budget Office, in a November 2011 report, said this exact type of proposal “would have the largest effects on output and employment per dollar” compared to those that “affect businesses’ cash flow but would have little impact on their marginal incentives to hire.”
“Cutting taxes to reward growth and job creation is a tried and true way to pump up the economy in Upstate New York,” continued Schumer. “Democrats and Republicans have come together to support these ideas before, and we should do it again.”
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