What’s good and bad for small business in the President’s budget

    By Adrienne Burke | Small Business

    On the White House’s list of “the top 10 things you need to know about President Obama’s 2014 budget” that was released yesterday, numbers 1, 2, and 3 are all designed to please small business. The White House says that the $3.78 trillion budget, proposed for the fiscal year starting in October:

    • Ends tax breaks for companies who ship jobs overseas and rewards businesses that hire here at home;
    • Creates jobs and builds the communications and transportation network that businesses need to succeed by fixing roads, bridges, and other infrastructure most in need of repair first; and,
    • Gives small businesses a 10 percent tax credit to hire new workers or increase wages.

    In fact, the President’s 179-page budget proposal invokes the term “small business” 93 times, including proposals to extend increased expensing for small business, eliminate capital gains taxation on investments in small business stock, double the amount of expensed start-up expenditures, and expand and simplify the tax credit provided to qualified small employers for non-elective contributions to employee health insurance.

    The budget proposes a $109 million cut to the SBA budget from the 2012 enacted level, but says this cut is “due primarily to the decreased estimated subsidy cost of its 7(a) Business Loan Guarantee Program,” which would be revamped as a streamlined and simplified $7 million “SBA ONE” lending platform. The budget also proposes eliminating fees on 7(a) loans of less than $150,000.

    Still, many critics say the budget does not go far enough to reduce the deficit, and there are several specific items that small business advocates dislike.

    Small Business Majority CEO John Arensmeyer said in a statement yesterday that, while many line items are favorable for small business, his Democrat-leaning constituency does not applaud the President’s proposed Social Security program cuts, because they believe it would cut into consumer spending. Nor does the Republican-leaning National Federation of Independent Business like the President’s proposal to raise the national minimum wage to $9 from $7.25. NFIB calls the pay hike a “major anti-jobs policy that will limit the volume of net new jobs at a time when the economically essential element of small business job creation is already struggling.”

    NFIB President Dan Danner also objects to the President’s approach to federal tax reform. His strategy to focus on corporate taxes, Danner said in a statement, “will almost certainly involve a tax increase for … small business owners.” And the American Society of Pension Professionals complains that the budget “slams small business retirement plans” by retaining a double tax on 401(k) contributions and imposing an additional penalty on retirement savings with a cap.

    Here are some other small-business specifics in the President’s budget:

    1. A one-time, temporary 10 percent tax credit for increases in companies’ wage payments over wages paid in 2012, whether driven by new hires, increased wages or salaries, or both. The credit would be available to businesses with less than $20 million of total wages paid in 2012 for up to $5 million of increased wages.

    2. Approximately $14 million in additional funding to combat misclassification of workers as independent contractors, including $10 million for grants to States to identify misclassification and recover unpaid taxes, and $4 million for personnel at the Department of Labor’s Wage and Hour Division to investigate misclassification.

    3. Creation of an automatic workplace pension program that would require employers who do not currently offer a retirement plan to enroll their employees in a direct-deposit Individual Retirement Account that is compatible with existing direct-deposit payroll systems. Employees may opt out, and businesses with 10 or fewer employees would be exempt, but the budget would increase the maximum tax credit available for small employers establishing or administering a new retirement plan from $500 to $1,000 per year for four years.

    4. Expansion of entrepreneurship training opportunities for underserved communities through a re-launch of the Emerging Leaders program, which seeks to train and develop existing small business owners with the potential to grow, as well as expansion of entrepreneurship education for veterans transitioning to civilian life as part of the Administration’s Boots to Business initiative.

    5. Reauthorization of the 504 Loan Refinancing program through September 30, 2014, to help small businesses lock in low, long-term interest rates on commercial mortgage and equipment debts.

    6. Investment of $40 million for Emerging Leaders, an entrepreneurial education initiative that SBA initially launched in 2008 to educate existing small businesses with the potential to grow their business. The revamped program will become a public-private partnership, funded with SBA and private matching dollars, to support a small business leadership model built on the best practices of other working private sector and non-profit models.

    7. $4 million for SBA to hire 32 new Procurement Center Representatives, who will be strategically embedded across the Federal Government to increase the small business share of Federal procurement awards through such actions as reserving procurements for competition among small business firms and providing small business sources to Federal buying agents.

    8. $2 million to support the work of the President’s Export Promotion Cabinet, helping small businesses to expand their exporting capabilities.

    What's your take on the President's Budget Proposal? Tell us in the comments.

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