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Senate passes long-stalled small business bill; House expected to follow

November 12, 2010

The U.S. Senate on Sept. 16 passed a long-stalled measure that would boost lending to small businesses. The 61 to 38 vote sends the measure back to the House of Representatives, which passed a similar bill and was expected to quickly approve the Senate’s version.

With the unemployment rate stuck at 9.6 percent, voters cite jobs and the economy as their top concerns. If the measure clears Congress, it would be a rare victory on the job-creation front for Democrats, who have seen many of their other efforts blocked by Republicans this year.

Republicans have characterized the bill as a bailout along the lines of the unpopular Wall Street bank rescue effort, and blocked action at the end of July. Returning from a month-long break, two Republicans broke with their party to give Democrats the votes they needed to advance the bill.

Smaller firms have complained of trouble getting access to credit after the 2007-2009 financial crisis, when many banks sharply pulled back their lending activity.

Small banks to help small business?

The bill, backed by industry groups, would create a $30 billion fund that the government would invest in independent community banks to encourage lending to small firms.

It also would exclude from taxes all capital gains on sales of small-business stock, and ease tax rules for expending and depreciating equipment. Tax breaks in the bill total $12 billion.

Democrats estimate the measure could create 500,000 new jobs. Some 8 million jobs have been lost since the recession began in late 2007.

Republicans, meanwhile, have invoked small businesses as they oppose a proposal from President Obama that would raise income taxes on the wealthiest 3 percent of U.S. households, arguing it would snare many who file business income as personal income.

Sen. Charles Grassley (R-Iowa) said he supported the bill’s tax provisions, but not its lending facility.

"The small-business fund in the bill just doesn’t have enough safeguards in place to ensure that recipients are credit-worthy or that the taxpayers will be made whole in the end," Grassley said.

The government’s definition of a "small business" varies by sector, but typically encompasses firms that employ fewer than 500 workers or take in less than $7 million in annual revenue.

The bill’s fate had become entangled with a separate battle over a provision in the health-care overhaul that requires businesses to file a 1099 tax form when they pay a vendor more than $600 in a year, a source of anger and protest from small businesses and their representatives in Washington. Supporters of the small-business bill said small firms were having trouble getting loans, even if their businesses were solid.

 

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