This month, millions of Americans will receive checks from the U.S. government-in the amount of $400 to be exact-because of an increase in the child tax credit. Likewise, everyone will feel a little less sting every month as our income tax brackets are reduced.
For almost three months, businesses, especially small businesses, have made new investments and, hopefully, seen a rise in orders because of an expansion of the small business deduction from $25,000 to $100,000 and an increase in the depreciation schedule to 50% for all businesses during 2003 and 2004.
Perhaps most importantly for our community, the new investments we make today in entrepreneurs, new ideas and their management teams will be taxed at a capital gains rate of 15% rather than at 20%.
All of these changes were made possible by the passage of the Jobs and Growth Act of 2003. The vote on this measure came down to the wire. We owe tremendous thanks to President Bush, the Republican leadership, Chairman Thomas and Chairman Dreier for pushing it across the line.
First and foremost, President Bush should be thanked. Not only did he sign the Act on May 28, but he fundamentally set the debate early this year. He saw that not only the U.S. economy needed help out of its “soft patch,” but he knew what sort of stimulus was needed. From the start the president recognized that small businesses and issues of capital formation were at the heart of the problem and had to be part of the solution.
In his State of the Union speech, the president said: “Jobs are created when the economy grows; the economy grows when Americans have more money to spend and invest; and the best and fairest way to make sure Americans have that money is not to tax it away in the first place. Our plan will improve the bottom line for more than 23 million small businesses. …Lower taxes and greater investment will help this economy expand.”
In addition to the 231 members of the House and the 50 members of the Senate who voted in favor of the Act and the Republican leadership in both bodies, two chairmen in the House should be particularly singled out: Ways and Means Chairman Bill Thomas and the Rules Committee Chairman David Dreier, both of California.
The Ways and Means committee is responsible for writing the tax bills in the House. Chairman Thomas was one of the first to suggest a capital gains rate cut and wrote the House bill that included the principles laid out in the president’s plan and added additional measures like increasing the depreciation schedule and reducing the capital gains rate.
In addition to being chairman of the Rules committee, Rep. Dreier is co-chairman of the Zero Capital Gains Tax Caucus and was a driving force behind the inclusion of the capital gains cut in the latest tax cut package. During the conference that reconciled the differences between the House and Senate bills, the Zero Capital Gains Tax Caucus sent a letter to the conferees, stating: “As co-chairmen of the congressional Zero Capital Gains Tax Caucus, we are writing in support of efforts to include real capital gains tax relief in any final economic growth package considered by Congress. Such Action is key to sowing the seeds for both short- and long-term, job creation, and continued prosperity. It’s the right medicine for what especially ails our economy right now-a lack of capital investment. By freeing up capital, existing firms will have the funds they need to purchase new equipment, expand their operations, and create jobs. Just as importantly, capital gains relief will boost the availability of venture capital that is so important for new business startups at the leading edge of the economy.”
The Jobs and Growth Act of 2003 is a tremendous victory for our industry, one that was achieved because of the incredible thoughtfulness of several key policymakers, NVCA’s unwavering commitment to reducing the capital gains rate and because of the strong relationships we’ve built through the long-running presence of VenturePAC.
Mark Heesen is the president of the National Venture Capital Association.