Wendy H. Schacht
Specialist in Science and Technology Policy
The Small Business Innovation Development Act of 1982, P.L. 97-219, created Small Business Innovation Research (SBIR) programs within the major federal research and development (R&D) agencies. This effort was intended to increase participation of small innovative companies in federally funded R&D. Government agencies with extramural R&D budgets of $100 million or more are required to set aside a portion of these funds to support research and development in small firms through the SBIR program.
Reauthorized several times over the years, the SBIR program was scheduled to terminate on September 30, 2008. To date, the program has not been specifically reauthorized, but instead temporarily extended by several bills including P.L. 110-235 which extended the activity through March 20, 2009. P.L. 111-10 provided an additional extension through July 31, 2009; P.L. 111-43 through September 30, 2009; and P.L. 111-66 through October 31, 2009. P.L. 111-89 once again extended the program through April 30, 2010; P.L. 111-214 through September 30, 2010; P.L. 111-251 through January 31, 2011; and P.L. 112-1 through May 31, 2011.
Several bills have been introduced in the 112th Congress that would reauthorize and make changes to the SBIR program (and the Small Business Technology Transfer (STTR) Program) including H.R. 447, H.R. 448 (introduced January 26, 2011), H.R. 449, S. 493, (reported March 9, 2011, from the Senate Committee on Small Business and Entrepreneurship), and H.R. 1425 (introduced April 7, 2011).
During the 111th Congress, efforts to reauthorize and amend the SBIR and STTR programs included H.R. 2965 which passed the House and the Senate after the language of S. 1233 (amended) was substituted. In the closing days of the 111th Congress, the Senate also passed S. 4053, a bill to “reauthorize and improve” the SBIR effort. However, the House did not take up this legislation.
Date of Report: April 20, 2011
Number of Pages: 14
Order Number: RS22865
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Steven Maguire
Specialist in Public Finance
The alternative minimum tax (AMT) is a second federal income tax that operates along side the regular income tax. The AMT is intended to ensure that all taxpayers pay at least a minimum amount of tax on income. The AMT disallows or otherwise limits a variety of exemptions and deductions to achieve this objective. Specifically, personal exemptions, itemized deductions for state/local taxes, and miscellaneous itemized deductions account for 96% of the preference items that are subject to tax under the AMT but not subject to tax under the regular income tax. As a result, over certain income ranges, taxpayers who claim itemized deductions for state and local taxes, claim miscellaneous deductions, or have large families are more likely to fall under the AMT than taxpayers who do not have these characteristics.
In 2009, 3.88 million taxpayers were subject to the AMT, a slight decline from 3.95 million taxpayers in 2008. In 2008, New Jersey, Connecticut, the District of Columbia, New York, and Maryland had the highest percentage of taxpayers subject to the AMT. Tennessee, Alaska, South Dakota, Mississippi, and Alabama had the lowest percentage of taxpayers subject to the AMT.
In 2012, absent an increase of the AMT exemption amount, 34.4 million taxpayers will be subject to the AMT. At that time, whether a married taxpayer has itemized deductions for state and local taxes or miscellaneous deductions will become a much less important factor than it is at present in determining AMT coverage. This occurs because, whether they itemize their deductions or not, married taxpayers across a wide range of incomes will be subject to the AMT because personal exemptions are not allowed against the AMT.
The President’s FY2012 Budget proposes an alternative budget baseline where the AMT is permanently indexed for inflation based on 2011 parameters. The estimated revenue loss, assuming the tax cuts enacted from 2001 to 2003 are extended for middle income taxpayers, would be $1.55 trillion. The House-approved FY2012 budget resolution, H.Con.Res. 34, provides for the extension of the tax cuts for all taxpayers and lowers the highest bracket for corporations and individuals. H.Con.Res. 34 also provides for patching the AMT for all taxpayers such that the number of taxpayers subject to the AMT is less than or equal to the number affected by it in 2008.
Date of Report: April 18, 2011
Number of Pages: 12
Order Number: RS22083
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Marc Labonte
Specialist in Macroeconomic Policy
The budget deficit (the difference between outlays and revenues) each year from 2009 to 2011 has been the highest ever in dollar terms and significantly higher as a share of gross domestic product (GDP) than in any other year since World War II. The budget is not projected to be on a sustainable path under current policy, in the sense that it would cause the federal debt to continuously grow more quickly than GDP. While there has been no difficulty financing the deficit to date, at some point, investors could refuse to continue to finance deficits that they believed were unsustainable.
As one example of the policy changes that would return the budget to a sustainable path, CRS estimates that to stabilize debt as a share of GDP at its 2011 level would require budget deficits averaging no more than 2.5% to 3% of GDP over the next ten years. In dollar terms, this would amount to a deficit of about $400 billion in 2012, rising to about $550 billion in 2015. Under a current policy baseline, the deficit would decline from more than 9% of GDP in 2011 to 5% of GDP in 2014, and rise to 6% of GDP by 2019. To reduce the deficit to sustainable levels would require some combination of spending cuts and tax increases equivalent to roughly $700 billion in 2012 and $400 billion in 2015 compared to a projection of current policy.
The recent growth in deficits is the result of spending reaching its highest level as a share of GDP since 1945 and revenues reaching their lowest level as a share of GDP since 1950. Revenues are projected to be higher than their historical average from 2013 on if the “alternative minimum tax (AMT) patch” and “Bush tax cuts” expire as scheduled. Those tax provisions were extended through 2011 and 2012, respectively, by P.L. 111-312, which CBO projects increased the deficit by $374 billion in 2011 ($204 billion of which is attributable to expiring tax provisions). If these tax cuts are extended again, revenues are estimated to be reduced by about 2% of GDP each year from 2014 on, and will remain around their historical average from 2014 on.
Assigning the relative contribution of past policy decisions to the current deficit depends on one’s starting reference point. Compared to CBO’s 2001 baseline projection, legislative changes in 2009 and 2010 increased the 2010 deficit by $570 billion, while legislative changes from 2001 to 2008 increased the 2010 deficit by $947 billion. Changes to the economic projection increased the 2010 deficit by $135 billion.
Spending cuts in FY2011 are equivalent to less than 1% of the 2011 budget deficit. Under current projections, even if total discretionary spending (defense and non-defense combined) were reduced to zero in 2011, there would still be a budget deficit. Freezing total discretionary spending at 2011 levels (which would reduce spending in inflation-adjusted terms) would reduce the deficit by about 0.1% of GDP in 2012, gradually rising to a 1% of GDP reduction by 2018. If defense is not included in the freeze, the reduction in the deficit is less than half as large. Defense, Social Security, and Medicare account for more than half of total spending. Outside of those three programs and net interest, all other spending is about the same size as the budget deficit in 2011.
Growth in entitlement spending on the elderly drives long-term projections of large budget deficits—by mid-century, outlays on Social Security and health programs would exceed total revenues. Most proposals to reform entitlement programs for the elderly would generate significant budgetary savings in the long run, but little budgetary savings in the short run, partly because most proposals exempt current retirees from reform and partly because the savings from these changes would compound over time.
Date of Report: April 22, 2011
Number of Pages: 23
Order Number: R41778
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Robert Jay Dilger
Senior Specialist in American National Government
Oscar R. Gonzales
Analyst in Economic Development Policy
The Small Business Administration (SBA) has provided “technical and managerial aides to smallbusiness concerns, by advising and counseling on matters in connection with government procurement and on policies, principles and practices of good management” since it began operations in 1953. Initially, the SBA provided its own small business management and technical assistance training programs. However, over time, the SBA has relied increasingly on third parties to provide that training.
In FY2010, the SBA provided $239 million in funding to about “14,000 resource partners,” including about 1,000 small business development centers, 110 women’s business centers, and 364 chapters of the mentoring program, SCORE. The SBA reports that about 1.1 million aspiring entrepreneurs and small business owners received training from an SBA-supported resource partner in FY2010. The SBA has argued that these programs contribute “to the long-term success of these businesses and their ability to grow and create jobs.”
The Department of Commerce also provides management and technical assistance training for small businesses. For example, its Minority Business Development Agency provides training to minority business owners to assist them in becoming suppliers to private corporations and the federal government.
A recurring theme at congressional hearings concerning the SBA’s management and technical assistance training programs has been the perceived need to improve program efficiency by eliminating duplication of services and increasing cooperation and coordination both within and among SCORE, women’s business centers (WBCs), and small business development centers (SBDCs). For example, on March 15, 2011, the House Committee on Small Business recommended that several SBA training programs be defunded “because they duplicate existing programs at the SBA or at other agencies.” Congress has also explored ways to improve the SBA’s measurement of the programs’ effectiveness and to address the impact of national economic conditions on WBC and SBDC finances and their capacity to maintain client service levels and meet federal matching requirements.
This report examines the historical development of federal small business management and technical assistance training programs; describes their current structures, operations, and budgets; and assesses their administration and oversight, the measures used to determine their effectiveness, and WBC and SBDC finances and their capacity to maintain client service levels and meet federal matching requirements.
This report also discusses P.L. 111-240, the Small Business Jobs Act of 2010. It authorizes $50 million in additional funds for SBDCs to provide targeted technical assistance to small businesses for various specified activities, such as seeking access to capital or credit; guarantees each state not less than $325,000 of these additional funds; and waives the non-federal matching requirement for these funds. The act also authorizes the SBA to temporarily waive, in whole or in part, for successive fiscal years, the non-federal share matching requirement relating to “technical assistance and counseling” for WBCs. Two bills introduced during the 111th Congress, H.R. 2352, the Job Creation Through Entrepreneurship Act of 2009, and S. 3967, the Small Business Investment and Innovation Act of 2010, are also examined. They would authorize several changes to the SBA’s management and technical assistance training programs in an effort to improve their performance and oversight.
Date of Report: April 19, 2011
Number of Pages: 33
Order Number: R41352
Price: $29.95
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James M. Bickley
Specialist in Public Finance
The President and leading Members of Congress have stated that fundamental tax reform is a major policy objective for the 112th Congress. These policymakers have said that fundamental tax reform is needed in order to raise a large amount of additional revenue, which is necessary to reduce high forecast budget deficits and the sharply rising national debt. Congressional interest has been expressed in both a major overhaul of the U.S. tax system and the feasibility of levying a consumption tax. Some proponents of reform argue that the tax base should be broadened by reducing or eliminating many tax expenditures. Tax expenditures are revenue losses resulting from federal tax provisions that grant special tax relief designed to encourage certain kinds of behavior by taxpayers or to aid taxpayers in special circumstances. An alternative to increasing tax revenues is cutting spending. Thus, Members are faced with considering the best mix of tax increases and spending cuts in order to reduce deficits and slow the growth of the national debt.
Proposals for fundamental reform have been made in reports by the National Commission on Fiscal Responsibility and Reform (the “Commission”) and the Debt Reduction Task Force of the Bipartisan Policy Center. In the 112th Congress, fundamental tax reforms are proposed in two companion bills, H.R. 25 and S. 13, Fair Tax Act of 2011; H.R. 99, Fair and Simple Tax Act of 2011; H.R. 1125, the Debt Free America Act; S. 727, the Bipartisan Tax Fairness and Simplification Act of 2011; and H.R. 1040, the Freedom Flat Tax Act. On April 13, President Obama presented his Framework for Shared Prosperity and Shared Fiscal Responsibility, which includes fundamental tax reform. On April 14, 2011, Representative Paul Ryan introduced H.Con.Res. 34. On April 15, 2011, the House passed this FY 2012 budget resolution, which includes fundamental changes in the U.S. tax system. An evaluation of these and other proposals would consider the effects on equity, efficiency, and simplicity.
This report primarily covers fundamental tax reform. CRS reports are available online concerning the other three categories of tax reform: tax reform based on the elimination of the individual alternative minimum tax (AMT), proposals for reforming the corporate income tax, and proposals for reforming the U.S. taxation of international business.
A temporary individual AMT patch for 2010 and 2011 was included in the Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010, which became P.L. 111- 312 on December 17, 2010. The patch increased the individual AMT exemption amounts. Some proponents of tax reform argue that the AMT should be repealed or a permanent patch should be passed. The repeal or passage of a permanent patch of the individual AMT would require a major increase in taxes to offset the large revenue loss.
Options for reforming the corporate income tax are under consideration. The concept of lowering the marginal corporate income tax rate and broadening the corporate income tax base has been advocated by some Members of Congress. Other options for reform include corporate tax integration and the replacement of the income tax system with a consumption tax.
The current system of U.S. taxation of international business is complex and difficult to administer. Furthermore, critics argue that the current system is not sufficiently neutral, which results in economic inefficiency. Proposals to reform the system include the replacement of the current hybrid system with either a territorial tax system or a residence-based system.
Date of Report: April 20, 2011
Number of Pages: 14
Order Number: R41591
Price: $29.95
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