[Congressional Record Volume 145, Number 94 (Tuesday, June 29, 1999)]
[House]
[Pages H5048-H5049]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 START-UP SUCCESS ACCOUNTS ACT OF 1999

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from South Carolina (Mr. DeMint) is recognized for 5 minutes.
  Mr. DeMINT. Mr. Speaker, I rise today on behalf of myself and the 
gentleman from Washington (Mr. Baird) to introduce the Start-Up Success 
Accounts Act of 1999. The purpose of this legislation is to give small 
businesses an additional tool to manage finances and retain capital.
  Small businesses account for almost all of the net new jobs in our 
economy today, with minority and women-owned businesses making up two 
of the fastest growing categories of new businesses. Starting a 
business represents the hopes and the dreams of many Americans. But 
there is a problem.
  According to the U.S. Census Bureau, over 99.9 percent of all 
business failures are small firms. With all the promise of small 
business and the entrepreneurial spirit in this country today, only 
about half of the businesses that were started in 1992 are still in 
existence today.
  Many small businesses fail in the first few years for lack of 
capital. As a small businessman myself, I have appreciated firsthand 
the difficulty of acquiring and retaining capital both to start a 
business and to keep it going. The problem is caused in part by our tax 
system. When I started my business over 15 years ago, I was surprised 
when my accountant told me that we needed to make sure that I did not 
show a profit at the end of the year.
  Our tax system discourages capital retention. The problem is if I 
report a profit at the end of the year, I pay corporate taxes, and then 
when I pay myself a salary the next year, I am taxed again on the same 
money. The accountants call it double taxation. Every incentive of the 
tax system is to reduce profits and to reduce the amount of money in 
your company so that you can reduce taxes. I would like to change that.
  The very first dollar of new businesses is taxed and businesses are 
encouraged, just as I was in my business, to allow any excess capital 
to pass through. The ultimate result is less growth and less staying 
power for many small businesses. An April 1999 Dun & Bradstreet survey 
confirmed, and I quote, cash flow is the pervasive financial management 
issue for small business owners. It manifests itself in ongoing 
capital, managing inventory, extending credit to customers, all kinds 
of problems related to finances.
  The DeMint-Baird Start-Up Success Accounts Act begins to alleviate 
some of this problem. What it does is it will allow companies in each 
of their first 5 years of business to set aside 20 percent of taxable 
income into an account that will last for 5 years. So the span of these 
accounts can last up to 10 years when you put all 5 years together. 
What this does again is encourages small businesses to save money and 
to leave money in their company so that they can use it to create 
growth and opportunity. So 20 percent of taxable income each of the 
first 5 years for start-up savings accounts. This will help businesses 
stabilize and grow.
  In addition, small businesses could draw down on the funds of the 
accounts in lean years. That is many times the problem with small 
businesses. They will have one good year, they will take money out to 
avoid double taxation, the next year is a lean year and they have 
difficulty staying in business. This gives new businesses and small 
businesses the flexibility to keep capital in their company so they can 
invest it for the future.
  Small businesses are the engine to our economy today in this country. 
More small businesses that can find stable footing in those first few 
years

[[Page H5049]]

will mean more jobs and more opportunity for many Americans. We must 
return dollars, decisions and freedom to our Nation's new small 
businesses. I believe the Start-Up Savings Accounts Act is a good step 
in that direction.

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