Expanded tax incentive would spur IT, group says

WASHINGTON – Hoping to spark an increase in sales of PCs and related office equipment, an alliance representing small businesses, retailers and IT companies is urging the U.S. House of Representatives to increase the capital investment expense small businesses can deduct against their taxes.

The Alliance for Small Business Investment in Technology, which includes computer retailers Circuit City Stores and Radio Shack, as well as PC manufacturer Gateway and processor maker Intel, sent a letter to all House members Tuesday urging support for the increase.

Under an economic stimulus package passed by Congress this year small businesses can deduct $24,000 in capital investment against their federal taxes, and the deduction is scheduled to increase to $25,000 in 2003. The alliance wants the amount increased to $50,000. It says this would help spur growth among the estimated 24 million small businesses in the U.S.

Raising the deduction to $50,000 also would help increase sales of PCs and related computer office equipment, said Bruce Hahn, director of public policy for Computing Technology Industry Association (CompTIA), which has headquarters in Oakbrook Terrace, Ill. CompTIA is overseeing the Alliance for Small Business Investment in Technology.

Small businesses “would have to pay less in tax as a result, so they would be able to buy more product for basically the same money,” Hahn said. About one-third of the total capital investment expensed by small businesses annually is for PCs and other computer equipment, Hahn said. This translates into billions of dollars in purchases on PCs and related office equipment.

Language to include the proposal in legislation is still being drafted, a spokeswoman for the House Ways and Means Committee said late Tuesday. Though the alliance is urging the House to increase the deduction to $50,000, a description of the proposal under consideration says the capital investment deduction for small businesses would increase to $35,000. It would apply to tax years beginning after Dec. 31, 2001.

Another factor working against the proposal is time. With elections in November, Congress intends to complete its work by the end of this week and adjourn so that members can campaign. The alliance acknowledged this in its letter to House members, saying it nevertheless is important for the House to “stake a position and create a vehicle” for deliberations of the measure in the Senate.