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A break to benefit small business
U.S. President Barack Obama has laid out a new jobs plan designed to encourage businesses to invest and hire more through payroll-tax cuts, The Wall Street Journal reports.
An employer's share of the payroll tax would be temporarily cut in half to 3.1 per cent from the current 6.2 per cent on the first $5 million (U.S.) of a firm's payroll in 2012. Documentation provided by the White House points out that about 98 per cent of companies in the United States have payrolls of $5 million or less, which puts the bulk of this benefit squarely in the hands of small businesses. The plan also eliminates payroll taxes for firms that hire new workers or increasing current wages, though that break would be limited to the first $50 million of a company's payroll increase from the prior year.
A White House aide said the focus on small business is justified, because in many cases the community has been held back by economic headwinds.
"We think economically there is significant differentiation between the largest companies that are sitting on significant cash, and many smaller companies who have faced a perfect storm in terms of more difficulty getting work and capital," a senior administration official explained during a briefing for reporters before Mr. Obama's speech.
It's yet another signal that small businesses south of the border are expected to play a crucial role in any economic recovery. But back in June, a story in Entrepreneur raised the question of whether a payroll-tax reduction would really lead to more hiring. Breaks small businesses received earlier in the downturn don't seem to have created a job boom in the United States.
And a CNN Money headline a day before Friday's announcement was not optimistic: "Obama's 17 tax breaks for small business: Big whoop!"
"It's nice that you announce these things, but the question is how many actually make a difference," said Bill Dunkelberg, chief economist with the National Federation of Independent Business. "If I give you this cash gift in some form through all these tax credits, why would you suddenly desire to go hire somebody?"
But a section of the story entitled "Dear Mr. President" pointed out that "for companies looking to hire, a payroll tax credit would be a boon: Small business owners who are growing and already planning to hire would be able to pay their new hires more or hire more quickly if a payroll tax credit were enacted."
One thing's for certain, cash-strapped small businesses will remain hard-pressed to suddenly start a hiring boom. But every little bit helps.
IBM sets up technology incentive program
IBM is putting up $1-billion (U.S.) in financing to help small and medium-sized businesses purchase certain IBM systems and services, according to a story on the PC World website. "SMBs face difficulties in access to financing. They may not have the wherewithal to go get financing or credit, or they may not have time," said Ed Abrams, IBM vice president of mid-market business. "By making finance available to credit-worthy clients, we can help them fuel their business growth." IBM is applying the loans to the purchase of 29 IBM systems and services, including offers for cloud services, big data and analytic systems. IBM Global Financing will handle the loan processing and paperwork. The financing incentives will be available over the next 18 months. IBM Credit LLC will provide the loans in the U.S., and various banks will provide the loans in other parts of the world.
'Small but mighty innovators'
