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Wednesday, July 25, 2007

BusinessWeek: "Minimum Wage Increase Means Tax Breaks"

BusinessWeek's John Tozzi, on the subject of the federal minimum wage hike, writes that the bipartisan minimum wage increase was accomplished with the promise of tax breaks given to small businesses.

Here's an excerpt of what he wrote:

Workers earning the federal minimum wage enjoyed a boost from $5.15 to $5.85 an hour on July 24, the first of three annual hikes that will bring the rate to $7.25 in 2009. But along with the raise, Congress passed a package of $4.8 billion in tax breaks for small businesses that go into effect this year. While employers in 30 states and the District of Columbia won't be hit directly in the first year of the raise because state laws already mandate wages higher than the new federal rate, those businesses can still take advantage of the new tax breaks.

The biggest boon for most small-business owners is an expanded deduction for new purchases. Any firm making purchases of pretty much anything from livestock to software, real estate excluded, can take advantage of this so-called Section 179 deduction. The new law allows business owners to deduct $125,000 in purchases, up from $112,000. Only businesses that spend less than $500,000 on eligible equipment—a ceiling that was raised from $450,000—can qualify. Spend above $500,000 and the size of the deduction starts to shrink.

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