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Impact of Tax Bill on Entrepreneurship? Talk to Chuck

Posted by: Mark Marich on December 20, 2010 Source: Policy Dialogue on Entrepreneurship

After a lot of speculation that the House would fight the tax bill hammered out by the Senate and White House, it passed last week and was signed by President Obama. The $858 billion bill extends Bush-era tax cuts for all taxpayers, as well as 13 months of extended benefits to the unemployed and a 2% reduction of the Social Security payroll tax. It also continues the 15 percent top rate for capital gains and dividends through 2012 and enables businesses to write off 100 percent of capital purchases in 2011 and 50 percent in 2012.

Will the cuts have an impact on entrepreneurial activity in the US? Charles Schwab thinks so. In a USA Today interview, he called it a "giant step forward" that would "ignite investor confidence." Schwab continued:

I've been involved with a number of companies that started from scratch and seen them build up to lots of employees. This is a game changer in the sense that those people who are entrepreneurs at this level will find this totally stimulating, a total possibility. I wish it was longer than two years. But given the momentum, this will go a whole lot longer than two years once we see the proof of the pudding that this does inspire confidence, does build up decision-making around investing, invest in a sense of creation of new enterprises and along with it, job formation. At the entrepreneurial level, this is totally a positive event. People will be much more willing to risk capital for future growth.

He also expressed a growing sense of optimism that the economy might be ready to finally shake free:

Entrepreneurs are awakened and they're going to start doing their work. Small companies create 75% of the new jobs in America. We need them to be able to be willing to take slightly more risk, hire that one incremental employee. And the reason they do it, is the notion that "I can make a little bit more money than it's going to cost me." That's the critical question each entrepreneur asks: "If I hire one more person, after that cost, can I see myself clear of making some incremental profit?"

Category:  Growth & Poverty  Tags:  taxes

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