by Hector Barreto

President Bush has said that small business is the "embodiment of the American Dream." He couldn’t be more right. Not only does small business represent the bright light of opportunity, small businesses collectively are of enormous importance to our economy.

The single most significant contribution small businesses make, economically, is jobs. Lots of jobs. Small business creates between 60 and 80 percent of all net new jobs in this country each year. The birth and growth of a small business can place the American Dream within the grasp of far more people than the owner; the jobs it creates makes it an engine of opportunity for every person that business employs.

That enormous job-creating muscle is why the tax relief package, passed by Congress and signed into law by the President as the Jobs and Growth Tax Relief Act of 2003, incorporates so many elements that benefit America’s small businesses right down to the smallest firms.

First and foremost, as a package, the President’s plan is designed not only to stimulate the economy through job creation, but it directly benefits every American taxpayer, especially middle-income Americans. The Jobs and Growth Act contains tax reductions that will help families with children, married couples and investors of all ages. Economists have called it a win for working families that allows them to keep more of what they earn, and predict that it will benefit our economy in both the short and long term.

The child tax credit, for example, will be increasing to $1,000 (from $600) in 2003 and 2004. Before the Jobs and Growth Act, this simple tax credit increase was going to be phased in between 2005 and 2010. Now, parents don’t have to wait. In fact, families started to receive the increased amount of the child tax credit, in advance, in July 2003 on the basis of information on taxpayers’ 2002 tax returns filed in 2003.

And relief is finally in sight for married couples: the Jobs and Growth plan contained an acceleration of the reduction of the marriage penalty as well. The standard deduction for married couples is increased to double the amount of the standard deduction for single taxpayers in 2003 and 2004. Again, this relief was previously scheduled to "phase in" between 2005 and 2009.

The reduction in tax rates on dividends and capital gains brings investors a welcome change that makes common sense as well as real tax relief. The maximum tax rate on dividends paid by corporations to individuals and on individuals’ capital gains is reduced to 15 percent in 2003 through 2008. The elimination of double taxation is seen by many as an essential first step toward fundamental reform of our tax code.

The accelerated reduction in personal income-tax rates in excess of 15 percent will mean savings for married couples with taxable income greater than $47,500 and single taxpayers with taxable income greater than $28,400. The actual rate reductions are as follows: 27 percent will be reduced to 25 percent; 30 percent reduced to 28 percent; 35 percent reduced to 33 percent; and 38.6 percent will be reduced to 35 percent. These rate reductions are retroactive to Jan. 1, 2003.

It may come as a surprise to many, but those accelerated income-tax rate reductions, particularly in the top marginal income tax rate, also will be a tremendous help to small-business owners. This is because so many small-business owners file their business income on their individual income-tax returns. Accelerating the reduction in the top tax bracket to 35 percent will create a total of $12.4 billion in tax relief—nearly 80 percent of which will go to small-business owners and entrepreneurs (about $9.7 billion).

There’s an old saying in business that my father, an entrepreneur, taught me: "It’s not what you make. It’s what you get to keep." President Bush understands that, which is why the Jobs and Growth Act is allowing millions of small-business owners to keep more of what they make. In fact, 23 million small-business owners will be receiving tax cuts averaging $2,209.

The President also understands that when small business owners can keep more of their money, they are going to reinvest it in their businesses. With the ability to update or expand, small-business owners will hire more employees, give raises to the employees they have, buy new equipment or invest in advertising.

The ripple effect that comes from tax cuts for small-business employers is, I believe, the surest way to release the potential of America’s great economy.

Since this reinvestment is so critical for economic growth, the Jobs and Growth Act also contains a provision increasing the expensing level for investment in new business equipment. That’s everything from buying new computer equipment to a new tractor or vehicle. It’s a new dishwasher in the kitchen of a restaurant. A new stonecutter for a business that makes flooring or countertops.

As a former business owner myself, I know how much of an incentive this will be for growth because the amount business owners will be able to deduct is quadrupling, from $25,000 to $100,000. In addition, those who invest more than $100,000 will qualify for a first-year depreciation allowance of 50 percent. That’s a real difference and it will make a critical difference to business owners who were considering investing in new equipment, but weren’t sure whether they could afford to this year.

I had the privilege of traveling with the President on several occasions when he was talking to the American people about his vision for the Jobs and Growth package. I accompanied him to small-business roundtables, where we were able to talk about the benefits of the tax cuts with small-business owners.

At one of those roundtables, in Arkansas, we met Richard Derickson, a man whose father started their family business—a manufacturing company that makes panels for household appliances —back in 1947. The President mentioned Mr. Derickson in his speech later that day because he was a very good example of how the increase in business expensing really helps business expansion and economic growth.

Mr. Derickson had told the President that he wanted to buy a sheet washer that would improve his company’s productivity. That sheet washer was going to cost $250,000. And at the time, Mr. Derickson would only have been able to deduct $25,000 of that cost from his taxes. Now he can deduct $100,000 of it. I’m willing to bet he’s a lot more likely to make that investment now.

As the President pointed out that day, and on so many other occasions, when a business buys a new piece of equipment, another business benefits because it has to make that new piece of equipment. And the more things that are made, bought, sold and put into use, the more people are employed to get the job done on both ends.

Again, it’s that ripple effect that happens so quickly and spreads so far when the pebble of tax relief is dropped in the pond of small business.

I’ve lived and breathed small business since I was born, and to me there is nothing more American than starting your own business—taking your own ideas, passion and hard work, and turning them into something that produces income for you and your family and income for each of your employees. There really is no greater pride than seeing the employees of your family business prosper.

In just one generation, small business brought our family from being new immigrants, with my father working as a potato picker to earn a living, to one where his son was asked to serve his country by a great President, and was confirmed for that service by a unanimous vote of the U. S. Senate.

That’s what small business does. That’s what America is all about. And that’s why the Jobs and Growth Act will benefit this country’s economy with a brilliant ripple effect that can only start in our innovative, productive, job-producing, small businesses.

In Arizona, along the Mexican border, a number of ranchers participate in the Malpai Borderland Group, which has created grass banks that link conservation to enhanced ranching opportunities. Within the grass bank, grasslands flourish to provide prairie habitat for dozens of critters and plants. Yet the grass bank is also akin to an insurance policy: during times of drought or fire, participants can move their cows, temporarily, onto the grass bank to assure their survival. This linkage of conservation with economic benefits is a natural lure for ranchers.

It’s a truth as old as our country itself: when small business does well, America does well.