Bush tax plan helps businesses expand, save

by Eric Olson

SBJ Reporter

eolson@sbj.net

Lee Beaman of Beaman Electric hired 10 electricians in 2003 and is looking to add nine more field workers to his staff. Beaman also plans to add three new fleet vehicles and move into a facility four times the size of the company's current location all within the next year.

These big plans were on the board prior to enactment of President Bush's tax plan in May, but Beaman said tax savings and incentives within the plan broadened the scope of expansion.

"Most definitely," Beaman said. "We had this planned before that, but it sure helped."

Bush's tax plan, a $330 billion economic stimulus package termed the Jobs and Growth Tax Relief Reconciliation Act of 2003, swayed Beamen into spending more, especially on tangible property like new work trucks. But that was only after meeting with tax consultants who outlined the direct benefits of the tax plan benefits that include writing off 100 percent of tangible property purchases up to $100,000.

"I didn't know about all the benefits of the tax cut," Beaman said.

Beaman is perhaps not alone. SBJ's Economic Survey indicates that Bush's tax plan has had no effect on 68.5 percent of those businesses responding.

"I'm surprised that it's as high as it is," said accountant Tom Everett of Elliott Robinson & Co., who consults clients of ways to tax savings. "A lot of businesses that I work with have been excited about the increase of the expensing election."

The expensing election (also known as Section 179) portion of the tax plan allows businesses to write off tangible personal property purchases up to $100,000, an increase from $25,000.

Additional benefits can be had through the plan's bonus depreciation, which allows companies to write off 50 percent of purchases beyond the expensing election. The previous depreciation allowance was 30 percent.

"Of the clients I work with, I would say over 50 percent of them have bought stuff this year (2003) that they might not have bought, because of the increased limits," Everett said.

Count dentist George Graham among them. Like Beaman, Graham had growth plans in the works but was waiting for the right time. With plans to move next summer, Graham is deciding between a land purchase and a building acquisition. Graham plans on spending between $200,000 and $250,000 in new equipment to furnish his new office. Everett estimates that Graham will save $50,000 on his equipment purchases.

"This tax thing is a final impetus to go ahead and move and do something," Graham said. "There's been equipment I've wanted to buy for a couple of years. The time is now."

Take caution

But before joining Beaman and Graham in expansion, tax attorney Frank Carnahan warns business owners against taking a blind leap.

"We've been preaching it for years: Don't let taxes drive what you do," said Carnahan, a partner at Carnahan Evans Cantwell & Brown PC. "If it was enough of a break to make it worthwhile to accelerate your plans, you might do something. You need to make a business decision."

Carnahan said too often companies make impulsive purchasing decisions on promised tax savings that don't always materialize. For instance, several states (Missouri included) are decoupling from the expanding depreciation and net operating loss provisions in the tax plan.

"(Those tax breaks) just disappear in Missouri," Carnahan said. "There are some things, if you're in the right position, to help. But you really need to pay attention of everything that is going on."

The bottom line: "Factor in the taxes, but don't let the taxes drive what you're doing," Carnahan said.

And when in doubt, hire a tax consultant. That's what Beaman did, and he said he's reaping the benefits despite spending nearly six figures. Beaman hired business analysis firm International Profits Associates Inc. of Chicago this summer to assess his company.

"The wealth of knowledge that they gave us in five weeks was unbelievable," he said, adding that "the turnaround was almost instantaneous" by tweaking system operations.

Locally, Beaman works with CPA firm Roberts McKenzie Mangan & Cummings PC.

Investment opportunities

Financial advisors are hoping the additional capital made available to individuals and business owners finds its way toinvestment markets. So far, individuals have responded well, according to Lyle Spradling, a certified financial planner with American Express Financial Advisors