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By Don Longo
Critics have charged the $790 billion economic stimulus signed by President Barack Obama last month had less to do with reviving the economy than funding traditional pet projects of Congressional Democrats. The package consists of $286 billion in tax cuts; $311 billion in appropriation committee programs; and roughly $193 billion for new benefits such as unemployment assistance -- representing the biggest fiscal expansion of the federal government in the nation's history.
While there sure is a lot of spending that can be described as nothing but "pork," such as $50 million for the National Endowment for the Arts and $650 million for digital TV conversions, there are some things in the package that will provide relief to c-store retailers.
For example, the new law reduces 2009 estimated tax payments for certain small businesses. It extends the temporary expansion made in 2008 to allow small businesses to write-off the cost of capital expenditures in the current year instead of recovering those costs over time through depreciation. For 2009, small businesses can write-off $250,000 of capital spending subject to a phase-out once those expenditures exceed $800,000.
The new law also approves $200 million for the Leaking Underground Storage Tank (LUST) Trust Fund, which assists in the cleanup of abandoned gas stations. John Eichberger, NACS' government relations expert, said this doesn't directly benefit retailers, but the new fund might "take the pressure off of state tank funds so they can use regular money for operations and expenses of inspections."
Another provision increases the tax credit for installing alternative fuel systems this year and next. Petroleum retailers can claim a 50 percent credit up to $50,000. Previously, the 30 percent credit was capped at $30,000.
But the amount of relief provided to c-stores is chump change compared to the billions lavished on education, health care and infrastructure. You could make a case that much of this spending is warranted, but Republicans have noted many of the projects being funded won't begin for several years and will have no impact on the current crisis.
The Republicans don't have much credibility on this issue since it was their spending and tax policies that contributed greatly to the current deficits and recession (in addition to lack of Congressional oversight of Freddie Mac and Fannie Mae).
This nearly trillion-dollar spending plan (even higher once the costs of borrowing to finance it and the certainty that many temporary relief programs will become permanent are added) will lead to massive deficits. However, the tax cuts should have the desired effect of ending the current recession.
Since there is no alternative, we have no choice but to hope this flawed legislation gets consumers spending again. If that happens, we should see improvement by early next year. But the long-term costs of the package will result in huge deficits, potentially causing an even worse recession in 2011 or 2012 than we have today.
There's not much we can do about changing the package now. But there are other government actions that threaten the c-store industry that you can still do something about.
For one, Congress is about to take on credit card fees. Make sure your voice is heard by writing your representatives and senators, and tell them how important it is for them to take action on outrageous interchange fees.
Also keep a close eye on what comes up on the tax front. Don't let Congress tax another product category out of existence, like it is trying to do with tobacco.
As far as the economy is concerned, it's impossible to predict what's going to happen next week, let alone in 2012. The best we can hope for is that this nation has some responsible and trustworthy leadership in these troubled times. From what we've seen in Washington in recent years, the verdict's still out on that as well.