ARLINGTON, Va. — The $787 billion economic stimulus package signed into law last week should provide some tax breaks for retailers who invest in new equipment or hire certain individuals, according to industry trade groups.
“There are a number of things that could potentially affect retailers and wholesalers,” said Tom Wenning, executive vice president, National Grocers Association here.
The new bill extends the ability of small businesses to write off investments in equipment for up to $250,000 through 2009. Last year Congress had raised the limit for deduction-eligible spending from $125,000 to $250,000 for 2008 in an effort to encourage investment, and this year's bill renews that effort for another year. The ability to deduct for equipment investment gets phased out once capital expenditures exceed $800,000 per year.
That was one component of the stimulus package that NGA had sought in letters to President Obama and congressional leaders.
Both NGA and Food Marketing Institute, also based here, also supported the depreciation component of the bill known as the “50% bonus depreciation” that allows businesses to write off additional value on their investments.
“The economic recovery package will stimulate industry investment in technology, equipment and company growth,” said Leslie G. Sarasin, president and chief executive officer, FMI. “The 50% bonus depreciation in 2009 will enable retailers and wholesalers of all sizes to upgrade computer and refrigeration systems, buy new forklifts, and reconfigure stores and distribution centers according to changing consumer demands for food.”
Another tax incentive that had been sought by trade groups and was included in the stimulus plan is the expansion of Work Opportunity Tax Credits.
The 2009 stimulus package expands these credits to new categories of workers. Businesses can deduct 40% of the first $6,000 in salaries paid to unemployed military veterans and to certain “disconnected youths” who had not been employed or in school for the past six months. The provision applies to workers hired in 2009 and 2010.
For military veterans to qualify for the deduction, they must have left the military within the last five years and have been collecting unemployment for at least four weeks before they are hired, according to reports.
“Although it wasn't increased in terms of the amount that could be deducted, the expansion to include unemployed veterans I think is a positive,” Wenning told SN.
Some of the other tax implications of the stimulus package are still unclear, he pointed out.
For example, the “Make Work Pay” tax credit will mandate that employers withhold less tax from workers, but employers need some clarification from the U.S. Treasury about what might affect them, Wenning said.
“We're waiting to see how that may impact employers who take lower amounts of withholding.”
As far as providing an impetus for consumer spending, Wenning said it's difficult to predict what impact the package might have.
“It's hard to speculate with the way the economy is going and with all the unemployment,” he said. “Consumers are basically being very conservative. For those who are fortunate enough to have jobs, they are being conservative in their spending, and those who are not employed are trying to find jobs.”
The expansion of unemployment and food-assistance benefits should translate into more spending on basic necessities such as groceries, Wenning explained. The bill also includes $20 billion for the Supplemental Nutrition Assistance Program — the new name for the Food Stamp Program — an increase of about 13% over previous funding levels.
Other trade groups had a mixed response to the stimulus package.
In a prepared statement while the stimulus bill was being finalized, the National Retail Federation, Washington, said it supported those aspects of the measure that would help low- and middle-income consumers, such as the Make Work Pay plan and incentives for home buying, but it opposed certain other aspects of the bill.
“While these and other individual tax provisions will provide stimulus, this massive measure still fails to provide the direct and targeted tax relief needed to stimulate consumer spending,” said Steve Pfister, senior vice president for government relations, NRF.
The NRF had pushed for a “national sales tax holiday” that would have allowed the federal government to reimburse states for suspending their sales tax to spur retail spending.