Masonry Magazine April 1992 Page. 45
TAX MATTERS
Big Tax Victory Possible-
But Only With Your Help
Blackman Inititative for Growth of Small Business proposes tax deferral technique which can not only help jump start the economy, but keep it going in the long term.
I'M WRITING this column in San Diego awaiting my flight home to Chicago. I've just given a seminar at the national convention of a large business trade association where my topic was "New Ways to Win the Transfer Succession Game." The audience was made up of owners (and their spouses) of closely held businesses. The subject that kept coming up, however, was the President's State of the Union address. In particular, the portion dealing with tax breaks for businesses to help "growth" (the President's word). A business owner in the audience asked, "Irv, what would you suggest?"
My answer to this question was to introduce in public for the first time the Blackman Initiative for Growth of Small Business ("BIG" for short). In a nutshell, here's how it would work: all qualifying businesses (in general, a business with less than $75-million in gross annual revenues) would pay all or a portion of their income tax liability, the deferred tax liability, to the IRS over a five year period without interest.
How would the deferred tax liability be determined?-just four simple steps each taxable year:
Step #1-Calculate your qualified asset Increase by adding three numbers together each year, (1) your increase in accounts receivable, (2) your increase in inventory, and (3) fixed assets (land and depreciable property used in the business) acquired that year. Assume your qualified asset increase is $100,000 for your year ending in 1993.
Step #2-Determine if your qualified asset increase is five percent or more of your total of accounts receivable, inventory, and fixed assets (at book value) at the end of the preceding year (called your annual asset base). Suppose your annual asset base was $1-million for your year ending in 1992. You qualify for the deferred tax liability. Why? Because five per cent of $1-million is $50,000 and your qualified asset Increase is larger-$100,000.
Step #3-(a) Determine your tax liability (say $90,000) for 1993 in the normal way; (b) Reduce your taxable income by your qualified asset increase ($100,000) and then, refigure your tax liability (say $60,000), and finally Subtract (b) from (a). The difference ($30,000) is your deferred tax liability. The $60,000 is payable to the IRS in the usual way.
Step #4-Divide your deferred tax liability ($30,000) by five, which gives you $6,000. Pay $6,000 of the $30,000 when you file your 1993 tax return, another $6,000 in 1994, and so on until the $30,000 is paid in full.
A key comment: The above four step listing doesn't attempt to cover every rule and exception under BIG.
The key question is, "Will this tax deferral technique spur the growth the President is looking for?" Well, think about this-business will want to grow, financed in part by the tax deferral. Growth means more jobs. Banks will loosen their credit purse strings to finance this growth because the businesses will have fattened their balance sheets with assets to collateralize the loans. The government will have a stream of future income as the deferred taxes are paid. No doubt, you can add other ways in which BIG will not only help jump start the economy but keep it going in the long term.
Even if you think BIG has merit, we can't stand by and let George do it (pun intended). We've got to take matters into our own hands.
Okay. We're in this together. Here's the plan. Everyone who reads this should take the following actions to ensure this tax reform for small business.
Action A-Let Washington know you support BIG. Send a copy of this article to the President (1600 Pennsylvania Avenue, Washington D.C. 20500), but more importantly-to your representative in Congress and your two senators. You might also include an appropriate letter.
Action B-Send a copy of this to the managing editor of your favorite newspapers and the trade journals you read.
Action C-Send a copy to your trade association with a request to send a copy to all of its members. Let me know which trade associations you belong to, and we'll also lobby them for their support of BIG.
Action D-Send a copy to ten (or more) business owners (your customers, suppliers or friends).
Action E-Write the words "I DID IT!" on your business card or letterhead and send it to BIG, c/o Blackman Kallick Bartelstein, 300 South Riverside Plaza, Chicago, IL 60606. We'll keep you informed of the changes and help educate you once the new law is passed.
Wait! Don't put this down. Give it to someone in your organization. Now! To complete Actions A and E (FOR SURE), and any other actions you select as detailed above.
Here's to a BIG victory for every MASONRY-MARCH/APRIL, 1992 45