Mass layoffs like those at Bank of America are traumatic. Some 25 million Americans are unemployed or involuntarily underemployed, struggling to get by by juggling budgets. (For insight into what’s happening on the job front listen to the Marketplace special report, The Breakdown: The Ripple Effects of Unemployment.)
Little wonder the President, his Republican rivals for the Oval Office, Congressional Republicans and Democrats are all pushing their policy initiatives for turning around the bleak job market.
Rural America has been dealing with losing jobs and employers for a long time. Chuck Hassebrook is the executive director of the Center for Rural Affairs. The nonprofit focuses on improving the health of rural communities. He wants to make sure that rural America isn’t left out of the job-creating conversation.
Chuck Hassebrook: When it comes to rural job creation, microenterprise is big. In Nebraska’s most rural counties, 3/4 of all new jobs are created by microenterprises in fields ranging from catering lunches to producing wood and cooper barrels for Smithsonian Institution, Walt Disney Studios and 20th Century Fox.
And in hard times, microenterprise is important in all of America. During the 2000-2003 recession, employment grew over 9 percent in microenterprise, while falling almost 2 percent in larger firms. Microenterprise led America out of its last recession and can do so again with a little support.
Nevertheless, the small businesses on which rural America relies have long received short shrift in economic policy. Most job creation tax incentives are designed for much larger “small” businesses in high tax brackets, corporate America and high growth businesses seeking outside investors to inject capital for a stake in the business.
But help may be on the way. The day before the President presented his jobs bill to the nation, bipartisan legislation was proposed to create rural jobs with a tax credit for microentrepreneurs. The Rural Microbusiness Investment Credit Act of 2011introduced by Representatives Ron Kind (D-WI) and Wally Herger (R-CA), would help new enterprises start and existing enterprises grow by providing a 35 percent tax credit on up to about $30,000 of new investment. Owner operated businesses with up to five employees and $1 million of revenue in struggling rural counties would be eligible, as would beginning farmers and ranchers.
Three things about the bill make it more useful than traditional investment credits for the smallest businesses.
1) The credit could be carried back to recapture taxes paid in the prior five years. That makes it more valuable to start-up businesses and business hurt by the recession, which often don’t have the income to owe much in tax.
2) The credit replaces depreciation and other deductions with a 35 percent tax credit, which comes directly off taxes owed. That gives the small business in the lowest tax bracket the same incentive to invest as the large corporation in the 35 percent tax bracket.
3) The credit applies to a broader set of investments than equipment and plant. It covers increased investment in almost all aspects of the business, such as bigger inventories, new employees and increased advertising.
This tax credit is exactly what is needed for the rural economy. It would create jobs and genuine economic opportunity for the little guys that have long been the backbone of the rural economy. And with bipartisan support, rare in today’s Washington, Congress could actually pass it rather than just argue about it.
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