[Congressional Record Volume 163, Number 85 (Wednesday, May 17, 2017)]
[Senate]
[Pages S3011-S3012]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. THUNE (for himself and Mr. Roberts):
  S. 1144. A bill to amend the Internal Revenue Code of 1986 to 
encourage business creation by allowing faster recovery of start-up and 
organizational expenses, to simplify accounting methods for small 
businesses, to expand expensing and provide accelerated cost recovery 
to encourage investment in new plants and equipment, and for other 
purposes; to the Committee on Finance.
  Mr. THUNE. Mr. President, there is no doubt that the last 8 years 
were not good ones for the American economy. Yearly economic growth 
under the Obama administration averaged just under 1.5 percent. That is 
less than half the growth needed for a healthy economy. That kind of 
weak growth has consequences: fewer jobs, fewer opportunities, and 
lower wages.
  Wage growth was almost nonexistent during the Obama administration, 
and new jobs and opportunities were few and far between. There have 
been a few encouraging signs since the election. Both wage and job 
growth have shown some improvement, but we are still a long way from 
getting our economy back to full health. The GDP report for the first 
quarter of this year underscored the need to implement the kind of 
progrowth policies that were lacking during the Obama years.
  One major way to spur economic growth and improve the health of our 
economy is to reform our Nation's Tax Code. Our current Tax Code is 
strangling businesses, both large and small. Our Nation has the highest 
corporate tax rate in the developed world, putting American businesses 
at a competitive disadvantage in the global economy.
  Small businesses and family farms face high tax rates, at times 
exceeding those paid by large corporations. These tax policies have 
consequences. A small company that owes a large tax bill to the Federal 
Government is unlikely to be able to come up with the capital necessary 
to expand the business or hire new workers.
  When American businesses are taxed at a far higher rate than their 
foreign counterparts, it is likely to be the foreign rather than the 
American company that expands and thrives. Tax reform needs to address 
these obstacles to growth. Later this year, the Senate plans to 
consider a major tax reform package. Two of the most powerful tax-
related things we can do to increase economic growth are lowering 
business tax rates and allowing business to recover their investments 
in inventory, machinery, and the like faster.
  The Senate tax bill will do both. Today, I am introducing legislation 
that I hope will be a part of the final tax reform package in the 
Senate. My bill--I am calling it the Investment in New Ventures and 
Economic Success Today Act, or the INVEST Act for short--focuses on 
helping small- and medium-sized businesses by allowing them to recover 
their costs faster.
  Earlier this year, the Economic Innovation Group released a report on 
economic dynamism. Economic dynamism, as the Economic Innovation Group 
defines it, refers to the rate at which new businesses are born and 
die. In a dynamic economy, the rate of new business creation is high 
and significantly outstrips the rate of business deaths, but that 
hasn't been the case in the United States lately.
  New business creation has significantly dropped over the past several 
years. Between 2009 and 2011, business deaths outstripped business 
births. While the numbers have since improved slightly, the recovery 
has been poor and far from historical norms.
  The Economic Innovation Group notes that 2012, the economy's best 
year for business creation since the recession, ``fell far short of its 
worst year prior to 2008.'' Well, this is deeply concerning because new 
businesses have historically been responsible for a substantial part of 
the job creation in this country, not to mention a key source of 
innovation.
  When new businesses are not being created at a strong rate, workers 
face a whole host of problems. A less dynamic economy--the Economic 
Innovation Group notes--``is one likely to feature fewer jobs, lower 
labor force participation, slack wage growth, and rising inequality, 
exactly what we see today.''

[[Page S3012]]

Again, that is from the Economic Innovation Group.
  Well, starting a new business always has a substantial element of 
risk. We don't need to make it harder by throwing up tax and regulatory 
obstacles. If we want to see our economy thriving again, we need to be 
encouraging the creation of new businesses, but our Tax Code, too 
often, does the opposite.
  My bill, the INVEST Act, would encourage new business creation by 
allowing new enterprises to deduct a substantial part of their startup 
costs within the first year. Under current law, new businesses are only 
able to deduct $5,000 of their startup costs within their first year. 
Any startup expenses above that amount can be deducted, but that 
deduction is stretched out over a 15-year period. That is a long time.
  The faster a new business can recover its startup costs, the faster 
it can establish itself on a secure footing. Entrepreneurs are far more 
likely to take the risk of starting a new venture if they know they 
will be able to recover their startup costs quickly. My bill would 
substantially increase the amount of a business's startup costs that 
can be deducted in the first year from $5,000 to $50,000.
  Plus, any additional startup costs can be deducted over a 10-year 
period instead of the current 15. This will go a long way toward 
encouraging new business creation and the economic dynamism that comes 
along with it.
  The second part of my bill focuses on increasing cashflow for 
businesses, farms and ranches, and particularly those that operate as 
corporations and partnerships, by allowing them to use the so-called 
cash method of accounting. Under current law, these businesses, farms, 
and ranches are generally forced to use what is called accrual 
accounting. Basically, what that means is, a business has to pay tax on 
income before it receives the cash, and it cannot deduct all of its 
expenses when it pays the invoice.
  For a company with inventory, this means it has to deduct the 
investments it makes over an extended period of time. A small business 
might have to spend the majority of its available cash on inventory but 
be unable to fully deduct that expense until all of that inventory is 
sold.
  In the case of some businesses, it might be well beyond the current 
tax year before that substantial investment can be fully deducted. That 
can leave a business increasingly cash poor. Cash poor businesses don't 
expand. They don't hire new workers. They don't increase wages.
  Well, the INVEST Act would allow businesses to deduct investments and 
inventory up front, leaving them with more cash on hand to put back 
into their operations. It would also reduce the need for businesses to 
hire armies of lawyers and accountants to ensure that they have 
properly adhered to complex accounting rules.
  Finally, the INVEST Act would substantially reform the depreciation 
and expensing rules. Traditionally, farms and businesses have been 
forced to deduct expenses like machinery, property, or agricultural 
equipment over an extended period--anywhere from 5 to 10 years or as 
many as 39 years for commercial buildings. That could leave a farm or a 
business with its cash tied up for years in all the property it takes 
to run the enterprise. Of course, that means a farm, LLC, or S 
corporation can spend years without being able to increase its 
investment in a business or to hire new workers.
  My bill would permanently allow all businesses to deduct 50 percent 
of their investment in equipment, vehicles, machinery, and certain 
other kinds of property during the year in which they are purchased. It 
would also help small and medium-sized farms and businesses to recover 
an even greater portion of their capital investments by allowing them 
to deduct at least $2 million of new investments in business property.
  My bill expands current law so additional building improvements--
things like roofs, heating, and air conditioning units would qualify 
for immediate expensing. Farmers and ranchers who may reach the limit 
on full expensing are not forgotten either. The bill substantially 
increases the rate at which they can deduct the costs of tractors, 
combines, and other machinery.
  Finally, for those farms and businesses that rely on cars, light 
trucks, and vans, this bill would substantially increase the amount of 
their vehicle investment that can be deducted when the business 
determines its taxable income each year. Currently, a light truck used 
on a farm or ranch could cost upwards of $30,000. Yet a farmer is only 
allowed to deduct $19,000 of that cost over the required recovery 
period for a business vehicle. My bill would substantially increase 
that limit to bring it more in line with the real-world costs of 
business vehicles.
  These changes to expensing rules all have one goal: putting more 
money back in the hands of business owners--particularly, small 
business owners, farmers, and ranchers. Forcing business owners, 
farmers, and ranchers to lock up their capital for 5, 10, or nearly 40 
years discourages growth and job creation. Under my bill, businesses, 
farms, and ranches would be able to redeploy that hard-to-raise capital 
back into business expansion, increase in wages, new jobs, and even new 
ventures.
  The Congressional Budget Office predicts that the economy will grow 
at a rate of just 1.9 percent over the next 30 years. That is a full 
percentage point lower than the average growth rate over the past 50 
years, which was over 3 percent, or between 3.2 and 3.5. That will mean 
decades of fewer jobs and opportunities, low wage growth, and a reduced 
standard of living. We don't want to resign ourselves to that, and we 
don't have to. If we eliminate the antigrowth features of our Tax Code, 
if we lift the regulatory burdens facing American businesses and free 
up businesses to grow and create jobs, we can achieve a future of 
strong economic growth--the kind of strong growth that will fuel 
employment and wage growth, along with greater opportunities for 
American workers.
  I hope the INVEST Act will help us develop the kind of tax reform 
legislation that will help us restore strong, sustainable economic 
growth, and I am looking forward to working with Chairman Hatch and all 
of my colleagues on the Senate Finance Committee to put together the 
final bill and to get it to the President.
  It is time that we give the American people a tax code that actually 
works for them.
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