Businesses are not spending money on new computers in 2001. Two years ago, most IT managers were worried about supporting all the new employees streaming onto their already crowded networks. Now, most IT managers are worried about their jobs. The last thing an IT manager wants to do is draw attention to himself by asking for new computers to replace the clunky Pentium II ø 266 MHz boxes running Windows 95 littering the desks of the people that survived four rounds of layoffs since February. Best to just leave it alone.

As an independent IT consultant, my job is to try and find the best technological solutions for companies to implement at the lowest price. Even before the tech bubble burst in 2000 and the evil attacks of 9/11, most small to medium-sized businesses were looking for the lowest cost solutions available to them to keep IT costs low. This was not the case for a lot of the big companies a couple of years ago. The major PC players like Dell and Compaq counted on the large accounts to generate a lot of revenue for them. To that end, the big boys in the PC biz fought over who would get multi-million dollar accounts from the other big boys. Big businesses like Nortel and Lucent had a more devil-may-care attitude about their IT expenditures a couple of years ago, but companies like them are now paying the price.

Now the focus is on the small to medium-sized businesses. Compaq and Dell have negligible relationships with the small business sector ø not quite ignoring them, but not exactly going out of their way to support and cultivate that market segment. There are small business buyerÕs sections on Dell and CompaqÕs websites, but I have not heard much about the dedicated small business support and service divisions in either company. If there has ever been a time to buy a computer, it is right now while prices are so low. Chances are both PC giants will be looking to fight over the small business sector now that the big accounts have lost some of their luster.

The good news for the small business PC buyers is that part of the economic stimulus package that the Bush Administration is trying to get through Congress has some tax breaks for them. Reuters reported on Friday that a group of bipartisan Congressional lawmakers want to give businesses some incentives to spend on Information Technology. Rep. Jerry Weller (R-IL), Rep. Fred Upton (R-MI), Rep. Gene Green (D-TX) and Sen. Conrad Burns (R-MT) are supporting tax write-offs for new PC and other high tech equipment as part of the $75 billion economic stimulus plan. The idea is to reduce the five-year time frame over which businesses can depreciate high-tech equipment, thereby encouraging businesses to spend more on new technology. Replacing a companyÕs computers every five years sounded like a good idea in 1981 (the last time Congress addressed this issue), but now PC product cycles are gauged in months rather than years. ÒEssentially our tax code discourages us from bringing the latest technology into the world,Ó said Rep. Weller, who was the sponsor of a bill back in April that would allow firms to write off all high-tech purchases each year.

The reason why I say this is good for small businesses is that I have been told that big companies do not want to have their PC purchases to depreciate so quickly. An accountant in Dallas I spoke to told me that the idea of a huge publicly-traded companies like Boeing or General Motors replacing their computers every couple of years hurts their bottom line. If a company buys $100 million dollars worth of computers in 2001, they can spread out the expense of the purchase of these computers over a five-year period. Much like a new car, a new computer will depreciate in value and can be written off as an expense on company taxes. By 2006, the computers are no longer worth the $100 million, but the company has been able to claim the expense of their $100 million purchase on their taxes over that five-year period.

If companies were able to immediately write off $100 million in computer purchases on next yearÕs taxes, it would be great in the short term. Companies get a big tax write-off on their purchase, and they are up to speed on the latest technology. PC makers get the sales they so desperately need, and the US economic outlook becomes a bit rosier. The bad news is that these companies are still out $100 million to buy these computers and that looks bad on the bottom line for shareholders. ÒA tax write-off,Ó says the Dallas accountant, ÒdoesnÕt mean that you get all the money back at the end of the year.Ó Shareholders are looking for profitability from companies more than ever. If your big company is seen blowing 100 million bucks on new computers just to get a tax write-off but end up making Òless than expectedÓ sales for the year, those PC purchases seem like a less than brilliant idea.

The benefactors of this technology tax write-off plan would be Americans who have small businesses or are starting new businesses. When starting a new business, you can effectively write-off on your taxes the initial expense of your cool new 1.2 GHz Athlons running Windows XP. This comes in handy the first few years of the business when money is tight, and you know that profitability is a year or two down the road. An established small business can also use the immediate write-off for their aging computer systems as a short-term solution for paying fewer taxes for whatever reason.

As much as I love to see tax relief in its many wondrous incarnations, I do not see a whole lot of benefit to Congress allowing businesses to expense PC and other high tech toys on our taxes. I think Americans would see more economic relief in the form of capital gains tax cuts and a repeal of the corporate alternative minimum tax, allowing corporations to spend more money on IT and jobs. Either that or ending the whole corporate welfare system and pork barrel spending sprees Congress is famous for.

If Congress was really serious about helping the economy in the high tech sector, they could start by letting businesses keep their money to invest in AmericaÕs working men and women.

Scott McCollum is an independent consultant and tech industry insider living in Austin, Texas. He is a contributing editor for World Tribune.com and his column will be featured in WorldTechTribune, a new publication by WorldTribune.com, which will be coming soon. His opinions have also been featured at Pure Politics, the NewsFactor Network and on the internationally syndicated Cyber-Line radio talk show.

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