Dubious deal? Small biz mixed on cliff compromise

Published on NewsOK Modified: January 2, 2013 at 4:16 pm •  Published: January 2, 2013
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"All of those things are kind of the foundation of this anxiety that's out there — when is the sword going to fall, what is the effect going to be," he says. "It's that anxiety that causes (a small business owner) to slow down."

That means 2013 is likely to look a lot like 2012 for small businesses, says Kathleen Allen, a professor of entrepreneurship at the University of Southern California Marshall School of Business.

"I don't think that this kind of uncertainty and volatility is going to change anytime soon," she says.

Some other important issues for small businesses related to the fiscal cliff deal:

Business tax breaks survive: Owners contemplating equipment purchases got some help. The bill maintains what's known as the Section 179 deduction, which allows small businesses to deduct rather than depreciate the cost of many types of equipment, at $500,000 for 2013. It was scheduled to fall to $25,000.

Also extended for another year is what's known as bonus depreciation. That allows businesses to deduct 50 percent of the cost of equipment or real estate. It gives them a quicker tax break than the tax code's standard depreciation schedules, which require that the cost of property be depreciated over the course of a few years or decades, depending on the type of property.

The continuation of these deductions means Traxler Tees can buy more equipment and hire three full-time staffers, says Zachary Traxler, owner of the Columbus, Ohio-based company that makes custom-printed T-shirts.

"That's going to allow us to do a major expansion," Traxler says. He wants to branch out into business cards and other products. The tax savings he expects from the bill will help fund that growth.

Payroll taxes will hurt spending, but jobless benefit-extension could help: The end to the 2-percentage-point cut in the Social Security payroll tax is worrisome for many owners. The payroll tax cut, first enacted two years to encourage people to spend, will be allowed to lapse. A worker earning $50,000, for example, will now have $1,000 less in take-home pay. Workers will start feeling the pinch as soon as the first paychecks of 2013 are issued. Many people will respond by cutting back on discretionary spending and that's bound to hurt many small businesses.

"Think about the person who runs the local sandwich shop, the coffee shop, the local business person ... they'll feel it more," says Ceru, the adjunct professor at Babson.

On the flipside, the bill extends long-term jobless benefits, keeping money in the pockets of many people who are actively seeking work for another year.