This past Wednesday President Bush signed into law the much-debated $168 billion Economic Stimulus Act of 2008. While the main thrust of the package provides rebate checks to individuals and couples, it also includes a series of provisions intended to boost business spending. The bill allows companies to depreciate 50% of the cost of an asset purchased in 2008. It also nearly doubles the Section 179 deduction that lets small businesses expense equipment instead of depreciate it over time. The limit for this deduction increased to $250,000 from $128,000 with up to $800,000 in qualifying equipment purchases, also up from $500,000.
Critics of the bill are worried that individuals and businesses won’t spend the rebate money or make additional purchases, which is the intent of the bill. Jane Kanoy, president of Cousin’s Advertising Inc. (asi/169465) in Thomasville, NC, has mixed feelings about the package. The depreciation increase will help with the new phone system and computer she is planning on purchasing, but the package won’t encourage her to make any additional purchases this year. “In the long run, it will put more money in the purchase stream because the money I save on taxes I’ll put back into my business,” she says. “But I’m not going to start buying more things because of it. I think that would be foolish in the kind of economy that we are living in today.”
Michael Hicks, president of Forney, TX-based Best Promotions USA LLC (asi/40344), formed the company back in June and is still in the process of building up the business. He calls the package’s benefits a very welcome surprise. “It’s not going to affect my decision at all this year because I am ramping up,” he says. “But the package is going to save us some money. That’s no question. When it comes the end of the year, it will be a somewhat significant tax savings for us. That money will go right back into our working capital and allow us to grow even more. So it’s definitely a good thing.”
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Posted by Holly Christian 