President Bush talks with owners and employees of JS Logistics in St. Louis, Mo., about his economic stimulus package on Jan. 22. The White House says its economic plan will benefit S corporations like JS Logistics.
The American Trucking Associations last month endorsed President Bush’s economic recovery plan, which focuses on tax relief as an engine for growth. In a Jan. 10 letter to President Bush, ATA President William Canary said that ATA believes “that your package is good for the economy, and therefore good for the trucking industry.”
ATA said that the tax relief proposed would boost consumer spending in several ways, such as reducing the marginal tax rates. “With increased consumption, businesses like trucking, manufacturing and retailers will witness higher rates of growth,” Canary said. “This will also serve to increase capital expenditures by business, which in turn will further increase truck freight volumes.”
Abolishing the double taxation of dividends not only would benefit citizens who invest, but it also will lower the cost of capital for businesses, thereby stimulating growth and creating jobs, ATA said. And business owners who purchase equipment to grow and expand their businesses will be assisted by a corresponding increase in expensing limits, the association noted.
In an effort to tout the benefits for small businesses, President Bush promoted his plan in a Jan. 22 speech to the employees of JS Logistics (www.jslogistics.com), a St. Louis-based trucking, courier and warehousing company. “I’m particularly thrilled to be in a place where the entrepreneurial spirit is strong, and that is JS Logistics,” Bush said in his opening remarks.
The President’s plan accelerates the tax relief package Congress passed in 2001, including a reduction in the lower tax rate to 10 percent from 15 percent, reducing the marriage penalty and raising the child tax credit to $1,000. “If the tax relief is good enough three years from now, surely it’s good enough today,” Bush said in his speech at JS Logistics.
According to JS Logistics co-owner Greg Hantak, one of the reasons the White House chose his company for the speech on small businesses is that the business is structured as an S corporation. C corporations pay taxes on income at the corporate level, although shareholders pay taxes if there’s a dividend. That’s why the White House considers dividend taxes double taxation. But in S corporations, income is taxed only at the shareholder level, so those companies are affected more by cuts in individual taxes.
In his speech, Bush argued that this aspect of his plan has received too little attention. “Oh, sure, you hear the typical class warfare rhetoric, trying to pit one group of people against another,” Bush said. “But lost in all the rhetoric is the fact that a significant number of small businesses pay taxes at the individual income tax rate, starting right here with JS Logistics…. The best way to encourage job growth is to let companies like JS keep more of their own money so they can invest in their business and make it easier for somebody to find work.”
Bush also touted the proposal to triple the cap on expense write-offs to $75,000 and permanent elimination of estate taxes. In 2001, Congress phased out the so-called death tax by 2010. But due to a quirk in budget rules, the death tax would return in full force in 2011.
Bush’s visit to JS Logistics drew praise from within his own administration. “I am proud that President Bush selected a trucking company as the backdrop to speak about strengthening small business,” said Annette Sandberg, the acting administrator of the Federal Motor Carrier Safety Administration. “His visit to J.S. Logistics underscores the importance of the trucking and bus industries to America’s economy.”
Sandberg said that many small businesses that would see increased job growth and greater demand for the transportation of products as a direct result of the President’s plan. She also tied the plan to safety. “Increased business expense tax deduction limits encourage companies to invest in new safety technologies and related systems.”
Although the owners and employees of JS Logistics were honored by President Bush’s visit, the several days of preparation did make their jobs a bit harder. “They close down exits and highways,” co-owner John Cochran Jr. told the Associated Press. “It’s a disaster, getting freight moved around.”
