No cliff, for now – Businesses left with more uncertainty

By Dennis Seid/NEMS Daily Journal

TUPELO – Small businesses aren’t quite sure what to make of Congress’ 11th-hour move to stop the fall off the fiscal cliff.
The uncertainty, business owners say, is that a long-term deal remains elusive. And uncertainty affects consumer confidence, which in turn affects business.
“My biggest concern is the indecision,” said Buddy Stubbs, owner of Busylad Rent-All. “Give me bad news or good news, but don’t leave me hanging. … nobody really knows what’s going to happen.”
The deal, hammered out Tuesday, extends some tax breaks but also raises rates on others. For example, the Work Opportunity Tax Credit, which provides tax incentives for businesses that hire underemployed groups like youth and veterans, was extended.
Also, the Section 179 deduction, which allows small businesses to deduct rather than depreciate the cost of many types of equipment, stays at $500,000 this year. It was scheduled to fall to $25,000.
And the bonus depreciation that allows businesses to deduct 50 percent of the cost of equipment or real estate – rather than stretching it out over time – remains intact.
But the 2 percentage point payroll tax cut wasn’t renewed, raising the rate from 4.2 percent to 6.2 percent for everyone.
Stubbs said employee raises will seem less to workers because of the payroll tax hike.
“And that’s not my fault,” he said.
Income taxes for individuals making more than $400,000 and families making more than $450,000 will see their rates rise.
For some small business owners who report their business income as personal income, they’ll be hit with the higher rates.
With the automatic spending cuts put off another two months, businesses say the economic picture isn’t that much clearer today than it was last week.
Daniel Owens, co-owner of Jump Tupelo, an indoor amusement center for children, said he was frustrated with the fiscal cliff talks.
“I knew they’d come through at some point and make a compromise, but on the other hand, they knew about this for so long,” he said. “I’m paying a lease for my business, and I know I’m going to pay it each month no matter what.”
Owens, like Stubbs and other business owners, said political leaders continue to “kick the can” on the deficit and spending.
That makes their own decision-making even more difficult.
“We bought a lot of equipment in 2012 in anticipation of having a good year in 2013,” he said. “And we try to replace 20 percent of our fleet every year. … but I’ll be honest, we put that off for a long time because we weren’t sure what was going to happen. We’re still not sure what’s going to happen. Uncertainty is still a big thing.”
dennis.seid@journalinc.com