In his State of the Union address last week, President Obama had a lot to offer to the nation’s small businesses. Here are some of the ideas he proposed:
• Using $30 billion in TARP funds that the big banks have repaid to help community banks make additional loans to small businesses.
• Eliminating all capital gains taxes on investments in small businesses.
• Offering tax incentives for businesses that invest in new plants and equipment.
• Eliminating tax cuts for companies that move jobs overseas.
• Passing comprehensive energy and climate legislation to promote energy independence. Ultimately, President Obama said, the transition to a clean energy economy would create millions of new American jobs.
• A National Export Initiative to help small businesses increase exports. The president vowed, “We will double our exports over the next five years, an increase that will support 2 million new jobs in America.”
Jobs were the number one concern for the president going into his address, and the proposal that has drawn the most attention so far was his announcement of tax credits for businesses that hire employees or give existing workers raises. President Obama spelled out more specifics of that plan January 28th in Baltimore. According to the White House web site, here are the details:
Through the Small Business Jobs and Wages Tax Cut:
• Businesses will receive a $5,000 tax credit for every net new employee that they employ in 2010. The total amount of the credit for any one firm will be capped at $500,000, to ensure that the majority of the benefit is targeted at small businesses. Start-ups will be eligible for half of the tax credit.
• Small businesses that increase wages or hours for their existing employees will be reimbursed for the Social Security payroll taxes they pay on real increases in their payrolls. This bonus would be based on Social Security payrolls, so it would not apply to wage increases above the current taxable maximum of $106,800.
• Firms will be able to claim the credit on a quarterly basis. This will get money out to businesses quickly and provide an incentive to hire and increase payrolls.
More details about the president’s other proposals will be announced in the coming weeks. In my opinion, many of these proposals are a step in the right direction-but, even if they get beyond the proposal stage, I’m not sure how quickly they can affect small businesses.
For instance, increasing exporting is an admirable goal, but one that’s easier for bigger businesses than small businesses to achieve. Succeeding in exporting is not a quick or easy process. And small businesses seeking to increase exporting or get involved in it for the first time will most likely need capital to do so.
Similarly, expanding tax credits to encourage hiring is a positive idea, but is a $5,000 credit enough to offset it the expense of hiring a full-time employee? Many small-business owners I know have gone without salaries themselves to get through the Great Recession. Do they have the money or confidence to add staff?
I’d love to hear your thoughts on the President’s proposals.