The Independent Insurance Agents & Brokers of America (IIABA) is hailing Wednesday’s enactment by President Bush of the Jobs and Growth Tax Relief Reconciliation Act, which reportedly provides independent agents and brokers several tax breaks that will help boost the performance of their businesses and provide a shot in the arm to the national economy, according to CEO Robert Rusbuldt.
The tax-relief measure was approved late last week by the House of Representatives on a 231-200 vote and by the Senate on a 51-50 vote, with Vice President Dick Cheney, the Senate president, casting the decisive vote. The $350 billion package is designed to provide a boost to the nation’s economic performance by implementing several individual taxpayer and business-targeted tax cuts.
Among the reforms that will prove immediately beneficial to IIABA member agents and brokers are the increase in the expensing provision for new equipment, the acceleration of personal income tax rate reductions and the cutting of capital gains tax rates.
“At a time when the national economy needs a stimulus, this tax cut package will put real money into the hands of taxpayers and entrepreneurs, giving Americans more money for life’s essentials and business owners more funds to reinvest in and grow their operations,” Rusbuldt commented. “The well-targeted business provisions will help agencies and brokerage firms redirect more money into their operations with the eye toward modernizing their businesses and hiring more staff, both of which are prescriptions for jump starting the engine that drives economic recovery and a healthy economy in this country—main street businesses.
The increased expensing allowance for new equipment and machinery will reportedly help agencies and brokerage firms as well as other businesses to upgrade their office and manufacturing equipment at a time when doing so otherwise would not be affordable. Under the Jobs and Growth Tax Relief Reconciliation Act, the business expensing allowance is increased four-fold to $100,000.
“For IIABA members, this provision means the difference between finally purchasing a new agency management system and buying new hardware, or making due with older equipment or systems,” according to IIABA senior vice president of Federal Government Affairs Maria L. Berthoud, who represented the Big “I” at the White House ceremony where President Bush signed the tax-relief bill into law. “The tax-cut bill will help agencies further modernize their operations at a time when working smarter and upgrading technology is imperative in the insurance industry and business in general.”
The Jobs and Growth Tax Relief Reconciliation Act reduces tax brackets from the current 27 percent, 30 percent, 35 percent and 38.6 percent levels to 25 percent, 28 percent, 33 percent and 35 percent, retroactive to the start of this year. The new individual tax rates benefit IIABA members who are formed as Subchapter S corporations by simultaneously lowering their tax bill and giving them more funds to invest in the future growth of their businesses, says Berthoud. More than a third (35 percent) of IIABA members are formed as Subchapter S corporations and pay taxes at higher individual rates.
“It’s simple math: lower taxes result in more money for business expansion and new hires,” Berthoud said. “We believe our members and millions of other businesses will grow thanks in part to the lower tax rates and other pro-growth measures.”
Additionally, the new measure lowers the tax rate on capital gains to 15 percent from the current 20 percent on stock and other asset sales, a result that will give entrepreneurs more access to funds to grow their businesses, says Berthoud.
“We commend President Bush for his leadership and the congressional leadership for the tenacity to see this measure to final passage,” Rusbuldt added. “The economy will be better because of this measure, which is the result of the commitment from the President and several congressional leaders, namely House Ways and Means Committee Chairman Bill Thomas (R-Calif.) and Senate Finance Committee Chairman Chuck Grassley (R-Iowa).”
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