[Congressional Record Volume 156, Number 31 (Friday, March 5, 2010)]
[Senate]
[Pages S1230-S1233]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BENNETT:
  S. 3083. A bill to amend the Internal Revenue Code of 1986 to allow 
the expensing of certain real property; to the Committee on Finance.
  Mr. BENNETT. Mr. President, we got some numbers this morning. 
Unemployment seems stuck at 9.7 percent nationally. We lost more jobs. 
In my home State of Utah, unemployment is at a 23-year high at 6.8 
percent. I know there are States represented by Senators here that 
would love to have 6.8 percent as their unemployment rate, but we in 
Utah do not like it.
  I want to talk about one aspect of the unemployment rate that I think 
has been ignored in the debate we have had around the country. The 
President says we are out of the woods, not far out of the woods, to be 
sure, but that we have turned around, that the recession has started to 
fade, and we are starting to come back. He looks at macronumbers and 
makes that statement with respect to GDP and all of the rest of that. 
He is missing a very important fact I want to highlight here today in 
the introduction of this bill.
  The economy is driven by a variety of forces. But the one thing we do 
know about economic activity is that jobs are created primarily by 
small businesses. When I say small, I mean really small. Over 7 million 
jobs have been lost since the beginning of the recession. We must ask, 
How many of those have been lost in small businesses? The answer is, 
over half of that number. Over 3.5 million of the jobs that have been 
lost have been lost in small businesses.
  We hear and look at the reports that are in the newspaper about big 
companies that have had layoffs and big companies that have stopped 
hiring. But it is the small businesses in the United States that have 
been the engine of economic growth and the engine of hiring all the way 
through.
  I have talked before about my own experiences as a small businessman, 
and I will revisit that here for a moment to put this in context.
  I have been involved in the creation of a number of businesses. Most 
of them have failed. That is the norm for small businesses. People get 
an idea. People get excited. They get caught up in the idea of having 
their own business. They start their own business, and they find it is 
much harder than they thought. They find the challenge is much more 
difficult than they thought or they simply run into challenges that are 
beyond their control and they end up failing.
  It is all summarized in a comment made by a woman who attended a 
meeting of Inc. magazine. Inc. magazine every year chooses the 
``Entrepreneur of the Year'' across the country in the various States. 
I was honored enough to be chosen as the ``Entrepreneur of the Year'' 
when I was CEO of a business in Utah, and as a reward for that we went 
to this convention down in Miami Beach. A panel was being held of small 
businesspeople.

[[Page S1231]]

Just prior to the panel, they announced that after the panel was over 
there would be a wine and cheese tasting event to be held on the patio 
of this hotel. Then they turned to the panel, and one of the women on 
the panel said: Entrepreneurs do not drink wine. Entrepreneurs drink 
vodka, neat. We can't do with this gracious living stuff. We are caught 
up in the tremendous pressure of trying to keep our businesses open.
  I do not drink wine or vodka, but I identified with her comments and 
her sentiments about how tough it is.
  Well, the President may think the GDP numbers show we have turned the 
corner. The people in small business recognize that in their part of 
this economy, we have not. Let me quote from an article in the Wall 
Street Journal regarding the National Federation of Independent 
Business' small business optimism survey. It was in December of last 
year, and author noted:

       Small-business owners grew even more pessimistic in the 
     final month of 2009, capping off what was a trying year for 
     their businesses. . . .
       Regular borrowers--those accessing capital markets at least 
     once a quarter--also continued to report difficulties in 
     arranging credit at the highest frequency since 1983, 
     according to the report.

  Mr. President, 1983, for those of us who remember, was the depth of 
the recession that followed the great inflation of the Jimmy Carter 
years, as President Reagan and the Congress were dealing with the 
dreaded double dip. We came out of the Jimmy Carter years with a 
recession, a recovery, and then another recession--the dreaded double 
dip or the ``W-shaped'' recession. Mr. President, 1983 was a very 
challenging year. I was running a small business at that time as well 
and I remember it very well. All right--the worst attitude with respect 
to their opportunities in small business since 1983, according to 
people who were on the firing line in small business.
  So what do we need to try to help small business recover and start 
creating jobs again? Again, the point I made earlier: More than half of 
the jobs that are created in America are created with small business, 
and these are small businesses that are doing less than $5 million a 
year. As I say, I have been involved in creating many of these 
businesses. Many of them failed. Fortunately, the small businesses I 
was involved in creating that did not fail earned enough money to repay 
me for all that I lost in the ones that did and created enough jobs to 
overcome the loss of jobs in the ones that failed, and the small 
business we created for which I won the award at Inc. magazine 
ultimately went to the New York Stock Exchange and employed 4,000 
people. Not bad for a small business that started in somebody's 
basement with originally four full-time employees. I was No. 5 in that 
business.
  So I have seen it happen on both sides--the failure side and the 
success side--and I know what it takes. I can tell you, the kinds of 
things the President is talking about and we have been doing here in 
this Chamber are not the things small business needs to survive. Let me 
talk about some of those, and they are in the bill I am offering today.
  One of the first things we have to recognize is that the worst thing 
that can happen to a small business financially is to earn a profit. 
You say: Now wait a minute, obviously you want to earn a profit. Yes, 
you want to earn a profit. But the worst thing that can happen to you 
is--as you are struggling on a cashflow basis to keep this business 
going and you cross the line into profits--the government shows up and 
says: We want half your profit immediately, and we want it in cash.
  You want your profit invested in inventory. You want your profit 
invested in accounts receivable. You want your profit invested in the 
capital investments that will allow your business to survive, and the 
government says: No. You have earned a profit and we want it in taxes 
and we want it in cash, and we won't take a percentage of your 
inventory and hold it to let you make the business grow. You have to 
liquidate that inventory to pay your taxes in cash.
  So the first thing that is in my bill will provide a 10-year net 
operating loss carryback provision for qualifying businesses whose 
average gross revenue per year is $5 million or less.
  You struggle with the business; you lose money the first year. You 
struggle with the business; you lose money the second year. You 
struggle with the business; you lose money the third year. But you keep 
it afloat, and in the fourth year, you start to earn money. And there 
is the government saying: We want our share of your profits, and we 
don't care that you have been losing money while you have been building 
this business--you have been losing money on an accrual basis while you 
have been borrowing from your brother-in-law and your credit card and 
your bank, and whoever would give you money to cover those losses, and 
now you are finally at the point where you are making a little profit--
we won't give you any consideration for all of those losses you have 
put into building this business. We are going to take our tax bite out 
of this year's profits, and that can be enough to sink the business.

  So this has a net operating loss carryback provision for qualifying 
businesses whose average gross revenues are $5 million or less.
  This is not a break for American Airlines. This is not a break for 
General Motors. This is a break for the person who is trying to 
duplicate the success I was lucky enough to be involved in--where we 
start something in a basement or a garage and see it grow to the point 
where it can go to the New York Stock Exchange.
  You could say: Well, Senator Bennett, you didn't need this net loss 
carryback provision when you did that business. That is true because we 
grew that business in what the New York Times and other publications 
called the decade of greed. It was the years of Ronald Reagan when the 
top marginal tax rate was 28 percent, which meant even paying taxes, we 
got to keep 72 cents out of every dollar we generated in profit. That 
was enough to allow us to fund the growth of that business. Today, the 
top marginal tax rate is over 40 percent. There is a great deal of 
difference. If we had had to try to grow that business in today's tax 
environment--and it went up to that level when Bill Clinton became 
President--we probably would not have been able to grow the business 
and we would not have created those jobs and we would not have been 
able to ultimately build a company big enough to go to the New York 
Stock Exchange.
  All right. I can't deal with the marginal tax rate. We don't have 
enough votes to do that. If I could, I would like to get it back to the 
28 percent it was with Ronald Reagan. If we are going to have the tax 
rate where it is, we need at least some kind of relief for small 
business. The 10-year net operating loss carryback provision is a way 
to give them some kind of relief in this time of great economic stress.
  No. 2--and this gets a little technical--I want to expand the 
definition of section 179 expensing to include structural changes to 
the physical property and make the current $250,000 deduction limit 
permanent.
  When you are making an investment in your business of a capital good 
that you need, whether it is a lathe in a machine shop or whether it is 
a warehouse and something that requires you to stockpile with material 
before you send it out to retailers, whatever it might be, you don't 
want to have to start paying taxes on the money you put into that 
capital good. You need the deduction for expensing that right now. That 
is another way to hold your taxes down.
  This second provision is tied to the first. The first gives you the 
net operating loss carryback provision. This one says you can expense 
in a much better fashion the money you are putting in up front for your 
structural activity.
  Then, No. 3: It sounds very minor, but to a business of the size we 
are talking about it can be significant. I want to increase the current 
startup cost deduction from $5,000 to $20,000. This will encourage 
entrepreneurs to invest right now rather than wait for the economy to 
improve.
  These are the three primary things that will be in the bill I am 
sending to the desk and introducing today.
  I wish to conclude with these comments. As I move around my State, 
and as I move around the country talking about the state of business--
back to the reference to the NFIB and their survey about optimism or 
pessimism among small business owners. I have

[[Page S1232]]

never seen a time of more pessimism than we have now. Even back in the 
1980s when I described the businesses that I was involved in then and 
the dreaded ``double dip,'' businessmen were not as pessimistic as they 
are now. They still had hope we could come out of this. Now, even while 
the national GDP numbers are looking good to the people at the White 
House, to the people on Main Street it doesn't look so good.
  This is what I hear: The venture capitalists tell me we are not 
making venture capitalist investments anymore. Why? Because the venture 
capitalist is there to capitalize and to finance the startup, and then 
the system is supposed to take over and finance the growth. We pick the 
entrepreneur who has the widget or the gadget, whatever it might be 
that is going to change the world.
  We say: Yes, your widget is marvelous, and we are going to fund that 
so you can get that going. But once you get it going, the system takes 
over. The banks give you the tools you need for your capital 
investment. Other investors come in who are not taking as big a risk as 
we are because they see now that your widget really does work. So the 
level of risk is lower, the system takes over, and we can take our 
venture capital and go out and look for the other entrepreneur who has 
a new invention. That is how the whole thing works.
  They tell me: We discover now the system doesn't take over. We 
discover now the money we have put into the widget, the entrepreneur, 
the inventor, isn't followed on by additional funding. If this 
investment we have put in is going to survive, we have to double down 
our bets.
  Instead of our venture capital now going to the inventor and the 
entrepreneur, our venture capital is going to places where it has never 
been required before. As a result, we don't have any left over for the 
true venture capital, and the whole system is shutting down in terms of 
job creation. We are getting to a circumstance where new jobs are not 
coming as a result of venture capital activity. This job creation I 
talked about and these small businesses are being stifled. That is the 
first part of the pessimism.
  The second part of the pessimism, of course, is that the stimulus 
money we have put into the system isn't getting down to small 
businesses at all. I received a letter from a small businessman in 
Utah. I identify with him because he has created a business of the same 
kind I have tried to create over my career before I came here.
  He says: I am writing because I am frustrated. I own a small business 
here in Utah--he names it. We employed 20 people.
  In the macro of the world, 20 people aren't very much, not enough to 
really worry about; except this fellow and his 20 people are 
representative of more than half of the job creation that is going on 
in this country historically.
  He says:

       I have a small business here in Utah that employs 20 
     people. Now I am down to 4 people as I can't get financing. I 
     put close to $2 million in technology development.

  There is the venture capitalist side of it.

       We are ready to launch our new system and services, but 
     have run out of funds and can't find investor groups that 
     would be willing to take a risk on technology at a relatively 
     new company. Why can't some of the stimulus money come to us? 
     I would hire 25 to 30 new people if I could receive funding 
     that I need to launch my product and services. Banks won't 
     lend, individuals are holding on to cash, VC groups are 
     looking for companies that have been around a few more years. 
     I don't want to violate SEC rules. Raising funds is 
     difficult.

  I don't have a solution to everything he is saying, but I do believe 
the kinds of reforms that are in the bill I am introducing will create 
a better environment for small business and make it easier for him and 
others like him to go to investors and say: Look, if you put some money 
into our business, we would not have to pay taxes as soon as it turns 
the corner because we will have this net operating carryback for 10 
years. We can expense some of the capital investments we make so we 
would not have to worry about paying taxes on it, and we have a current 
startup tax deduction that has gone to $20,000.
  These are very modest kinds of proposals, but they are the kinds of 
proposals that are rooted in real experience in Main Street rather than 
Wall Street; from real people who are creating jobs, have created jobs, 
who are hurting the most in this economy, and upon whom we depend 
primarily for the new job creation.
  As I said at the outset, we have bad numbers today. Unemployment has 
not come down in the Nation. More jobs have been lost. In my home State 
of Utah, we have hit a 23-year high in unemployment. We must look to 
where the jobs come from, and the answer to that is small business, and 
we must do everything we can to try to help small business get started 
and get going and get growing, and that is a way we will get out of 
this recession.
  Mr. SESSIONS. Mr. President, will the Senator yield for a question?
  Mr. BENNETT. I will be happy to yield.
  Mr. SESSIONS. I value the Senator's views on these issues so much. I 
recall when the Senator chaired the Joint Economic Committee, the 
Select Committee of the House and Senate. He was our chairman. Since 
then he has been known as one of the authoritative voices on our 
economy, as well as Senate business.
  I guess I would first say that I am very intrigued by your 
legislation. It sounds as though it is something that is exactly what 
we need. I don't, I guess, want to be in a political tit for tat, but I 
remember and recall the Senator from Utah opposing the stimulus package 
that was on the floor and voting against that and raising concerns 
about it. I think the general concern most often raised was one that 
Nobel Prize Laureate Gary Becker raised: It wasn't one that creates 
jobs.
  I guess I would ask, based on the Senator's experience in the Senate, 
the amount of money that went into that bill--the purpose was supposed 
to be to create jobs--give us your honest evaluation of how well it has 
performed.
  Mr. BENNETT. I thank the Senator from Alabama for his kind words. My 
own impression is that the stimulus package has created a few jobs with 
a very marginal kind of effect. Most of the money, it seems to me, has 
been spent in efforts aimed at research, which may or may not produce 
jobs 3 years, 4 years, 8 years, 10 years from now.
  As a member of the Appropriations Committee we held a hearing just 
yesterday with the Department of Energy and looked at the amount of 
stimulus money that was going into fund research in the Department of 
Energy and pointed out to the Secretary of Energy that only 7 percent 
of the stimulus money had been spent. To get ready for the energy 
research they were going to do, they had to hire new people. It, 
perhaps, has created some government jobs to get ready to examine all 
of the grants and look at all of the proposals and so on. I am not 
opposed to research, but this is not an immediate creation of jobs in 
the middle of a recession to be spending stimulus money in this 
fashion.
  I have also come to the conclusion that the jobs that have been 
created or saved, as this administration tries to add that word to it, 
have primarily been government jobs.
  I don't object to people working for the government. We have many 
civil servants who provide great value added in the work they do for 
the government. But the long-term projection of jobs that will add to 
the economy create new jobs and create new wealth. I do not see that 
the stimulus has produced any significant difference in that arena.
  Mr. SESSIONS. I thank the Senator from Utah for those thoughts. What 
a tragedy that is. I don't think people realize how much $800 billion 
is.
  So the Senator's legislation would be far less expensive and would 
immediately help small businesses create jobs without a government 
bureaucracy telling them what to do. Is that fair to say?
  Mr. BENNETT. I would say to the Senator that is the whole purpose of 
this. Let entrepreneurs who are taking the risks--drinking vodka neat, 
if you will--have the opportunity to create their businesses without 
the government showing up immediately and saying: By the tax law, we 
are going to punish you for getting your initial beginnings of success. 
Instead, we are going to delay the impact of the taxes on you until you 
have a sound financial footing under you. When you have that

[[Page S1233]]

financial footing under you, you can afford to pay the taxes and, more 
important, you can afford to hire more people who, as a result of their 
jobs, will also pay taxes.
  We must understand a very large reason we are having this deficit is 
not just the spending, as important as that is; it is the drop in 
revenue, and the drop in revenue comes because the economy is so bad. 
We must understand around here that revenue does not come from the 
budget.
  Revenue comes from the economy. We can budget any kind of revenue 
number we want, but if there are no profits and there are no jobs, that 
means there is no income, and the income tax, by definition, is 
dependent on income before it produces any revenue. We will not have 
the money we need to run the government because the economy will not be 
producing that revenue.
  I learned in business you cannot cost-cut your way to profitability. 
Cost-cutting is important in a business, and you should make sure you 
are not doing stupid things--and there are businesses that can spend 
themselves into bankruptcy--but you cannot cost-cut your way into 
profitability. The top line, the sales, the growth of the company is 
what creates profitability.
  The same principle applies to this economy. Yes, we must cut costs, 
we must cut spending in the Congress, but the way for a vital country 
is to grow the economy, and the biggest engine of growth in the economy 
has been and remains small business.
  Mr. SESSIONS. I thank the Senator.

                          ____________________