Fiscal Cliff Would Impose ‘Major Trauma’ on Tech Industry

If Congress and the White House don’t resolve the looming “fiscal cliff” crisis, the middle class is not the only sector that stands to suffer. According to a new CompTIA white paper, the tech industry, too, will experience “major trauma.”

The association noted this week that mandatory spending cuts would harm the United States’ small and medium IT businesses, which employ more than 2 million people and contribute $110 billion to the nation’s payrolls. There are a number of tax policies that have lapsed or that will expire by Dec. 31, CompTIA said, and that threaten to hit technology businesses. Those areas are:

  • Section 179 expensing: Small business expensing goes from $139,000 in 2012 to $25,000 in 2013. Upgrading to new technology equipment would be greatly affected, CompTIA said.
  • R&D: The research and experimentation tax credit, which encourages the development or improvement of new products and technologies, faces its end.
  • Government purchasing: The U.S. government buys a significant amount of IT services, through the Department of Defense and other agencies. CompTIA said reduced government spending on research will have a trickle-down effect on the entire technology sector.
  • Access to capital: If the fiscal cliff is not averted, spending cuts will apply to many programs, including those that increase small business lending and access to funding.  
  • Access to education: CompTIA said the Department of Education, the Trade Adjustment Assistance Community College and Career Training Grant, and Department of Labors Veterans Employment and Training are among the agencies and programs that would be affected. The IT sector makes use of each of these programs, according to CompTIA.

CompTIA surveyed IT and business executives and found that about two-thirds (65 percent) supported a degree of balance in addressing the fiscal cliff. Twenty-six percent said Congress should implement spending cuts and revenue increases equally, while 23 percent favored slightly greater spending cuts. And 16 percent supported slightly greater revenue increases.

As President Obama works to strengthen the economy, it is critical that he supports the efforts of small businesses to grow and innovate. It is equally important that his administration act to help displaced and unemployed workers who, with training and assistance, can find meaningful careers in IT, and contribute to U.S. innovation and global leadership,” Todd Thibodeaux, president and CEO of CompTIA, said in a prepared statement.

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