Here's a clear fact: Small business drives economic recovery. Companies with fewer than 100 employees pulled the country out of recessions in the early 1980s and 1990s, and they'll pull us out of this one. That's why I've been frustrated by the economic stimulus proposals in Congress and the lack of direct assistance to small business.

        Democrats have primarily focused on helping unemployed workers, assuming more dollars in the hands of consumers will mean more people will buy goods and thus more jobs will be created. The Republican-controlled House of Representatives passed a package giving huge tax breaks to large corporations, hoping the money would trickle down and create jobs. Just 16 companies, including IBM, GE, and even Enron, would get $7.1 billion!

        We'd get more economic and job-creation impact if Congress would enact direct tax benefits for small companies, such as:

        Tax credit or payroll amnesty for hiring your first employee. In 1997, there were 15.4 million nonemployer businesses; in other words, self-employed Realtors, consultants, contractors, hair dressers, doctors, etc. Their total revenues were $586 billion! Many of them could afford to hire an assistant, a salesperson, another worker.

        But it's a big hurdle to hire your first employee. It took me years before I was willing to face the burden of added paperwork, filing and paying payroll taxes, providing health insurance.

        A tax incentive could help overcome that hurdle. How about a one-time tax credit or a yearlong exemption from payroll taxes for hiring your first full-time employee? If only 2 percent of these nonemployer businesses hired someone, it would mean more than 300,000 jobs created.

        Income averaging. Small companies and the self-employed ride an income roller-coaster. One year, they can get a huge order or big client, then not have another single sale as large for years. If they lose money in the intervening years, they can carry losses forward or back. But many of these companies don't lose money, they just have income blips every few years, resulting in high taxes. Instead, allow small companies — say, those with less than $1 million in revenue — to income average over three to five years.

        Start-up expenses. You can't deduct many of your expenses in the year you set up shop; you have to amortize them over several years. We're about to see an explosion of new businesses as many of those who've been laid off start companies. Why not help their chances by allowing them to elect to accelerate depreciation of start-up expenses?

        Technology tax incentive. Helping small businesses get up to speed with technology is good for them and good for the economy.

        So, how about a small-business-only tax credit for technology training and consulting? This would mean I'd buy hardware, software and services. That's good for a lot of big businesses too.

       Rhonda Abrams is the author of The Successful Business Organizer. For free business tips, write her at 555 Bryant St, No. 180, Palo Alto, CA 94301.
       

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