By Al Crenshaw

What do small businesses want in the way of tax changes?

Members of a round table held by the House and Senate small-business committees last week learned that they mainly want repeal of, or relief from, the estate tax and the alternative minimum tax, and full deductibility of health care costs.

And by way of tax simplification, they want it made easier to use cash accounting instead of the more complicated accrual system, and they want depreciation rules modernized to more closely match the real useful lives of the equipment they buy.

Taxes are a "red hot" topic with small-business owners, noted Senate panel chairman Christopher S. Bond (R-Mo.), as he and other members from both chambers and both sides of the aisle promised to press for relief.

The tax burden on small business is "absolutely brutal," said Rep. Nydia M. Velazquez (D-N.Y.).

But round table members, who were there to "listen to the voices of small business" via officials of various advocacy groups, also indicated that any relief this year will emerge only after hard-fought battles.

Republicans at the meeting continued their call for full repeal of the estate tax and passage of all of President Bush's individual tax cuts. Democrats indicated they would try to peel off supporters.

The Democrats argued that the Republican estate tax repeal is too slow (which might split off older business owners), that the Bush tax-cut plan ignores businesses operating as corporations (perhaps splitting off those owners) and that proposed increases in certain Small Business Administration loan fees would be damaging (perhaps scaring off SBA borrowers and lenders).

Velazquez, who voted for repeal of the estate tax last year, said she does not support the current House bill because it puts off repeal for 10 years. That resonated with some at the meeting.

"The only people who can applaud that bill . . . are those who have heard on high that they are not going to die for 11 years," said Paula Calimafde of the Small Business Council of America.

The Democratic alternative is to boost the size of an estate that goes untaxed from the current $ 675,000 to $ 2 million next year, and eventually to $ 2.5 million. The amounts would be effectively doubled for a couple.

"We are going to be hard-pressed to say . . . that's not a good deal," said John Satagaj of the Small Business Legislative Council.

Under current law, the exemption rises to $ 700,000 next year and to $ 1 million in 2006. However, most participants argued that only full repeal will work.

"If we don't repeal it, the planning goes on," in which business owners must hire lawyers and accountants and perhaps buy large insurance policies to deal with the tax, said Martin A. Regalia of the U.S. Chamber of Commerce. "We need to do away with that particular cottage industry," he said.

House Small Business Committee Chairman Donald Manzullo (R-Ill.) agreed. "Let's just get rid of the danged thing," he said.

Though Democrats are not normally seen pounding the table for corporate tax relief, Sen. John F. Kerry (D-Mass.) argued that the Bush tax-cut plan "assists only those small businesses that file individual tax returns," and would do nothing for those organized as corporations.

"There's nothing in that [Bush plan] that is targeted to small businesses," Velazquez agreed.

Bond, on the other hand, cited Internal Revenue Service figures that "more than 90 percent of small businesses with gross receipts of less than $ 1 million are organized as pass-through entities," which are not taxed but pass profits and losses through to their owners for tax purposes.

The meeting also gave groups a chance to vent on some tax issues near and dear to the hearts of their members. The National Restaurant Association would like business meals to be made fully deductible, for example, and the wholesale representatives would like the restrictions on tax deductions eased on high-priced cars used in business.

These latter restrictions are aimed at people buying or leasing luxury cars and writing them off, but Michael A. Wolyn of the Bureau of Wholesale Sales Representatives said his group's members "are buying vehicles for the size of the trunk" so they can carry their materials. "I defy you to find a vehicle for under $ 25,000 that has a trunk big enough to put anything in it," he said.





House Ways and Means Committee Chairman Bill Thomas (R-Calif.) and Rep. William O. Lipinski (D-Ill.) introduced a bill last week that would sharply expand the reach of medical savings accounts.

MSAs are a form of health insurance that combines a high-deductible medical insurance policy to pay major costs with an IRA-like savings account to pay routine medical expenses. They have been in place on an experimental basis for several years -- and were expected to be very popular with small businesses and the self-employed -- but both eligibility and appeal have been limited.

The new bill would ease many restrictions. Notably, it would allow both employers and employees to contribute to the accounts, and it would allow employers to offer MSAs to workers through cafeteria-style benefits plans.





The House approved a measure last week that would allow banks to begin offering interest-bearing checking accounts to businesses. This is something small-business groups have been pushing for, but their applause was muted because the measure wouldn't take effect for two years.

Banks are currently prohibited from paying interest on business checking accounts, but many banks have employed other ways, such as sweeping funds into money market accounts or cutting prices on services so as to pay "implicit interest," said Charlotte Birch, a spokeswoman for the American Bankers Association.

The two-year delay is a transition period for banks that have invested heavily in such systems, Birch said, noting that the industry is divided and some banks would like to pay interest on business checking.

Some small-business groups don't see it that way.

"This two-year delay is nothing more than a bone that's being thrown to large multinational banks that don't want to compete for business," said Jack Faris, president of the National Federation of Independent Business.