State of the Union speeches are rarely memorable and most folks — including small business owners — know they are only a guide to White House thinking. Remember Bush's hydrogen car plan? Clinton's Hillary Care? Or Reagan's bid to eliminate ALL corporate taxes? Each one was proposed during the State of the Union — and each one was DOA.
President Barack Obama's State of the Union address Wednesday night had a similar ring. A large-scale domestic spending freeze? Doubtful. Will all Republicans and Democrats sign a marriage contract? I don't think so. How about a Senate version of carbon tax bill already passed in the House? Perhaps, but in reduced form.
Still, Obama's speech had several promising pro-business elements, among them:
- A tax credit for small business that create jobs or hike salaries
- Elimination of capital gains taxes on small business investments
- The use of $30 billion in federal bailout money to encourage community banks to make loans to small businesses
These proposals should appeal broadly to small businesses, especially bigger ones that are rapidly growing. For those in fast-growing service sectors that use lots of low-wage labor, for instance, the incentive to hire more workers or raise salaries and get a nice tax break in return is very appealing. Granted, it won't triple employment overnight. But for entrepreneurial small firms—and larger small firms-- in areas such as health and business services, restaurants and hospitality, among others, entrepreneurs could increase hiring as a result. Surely that would help job seekers.
Like most things in the small business universe, the littlest guys got the fewest goodies. Why? Because a struggling firm of five employees won't hire if the demand is not there. Only rising sales can do that.
What about the proposal to eliminate or postpone capital gains taxes? Again, this helps small businesses with larger operations. The entrepreneur with a few hundred thousand in a 401K or IRA account might not care much about capital gains taxes. Besides, the tax implications are better if the assets are in the business’ name than in the name of the individual owner.
Will the many small firms in real estate, maintenance or repair be happy with Obama’s ideas? Only if they are growing and can expand. Not if they are standing still. And many markets in the south and western parts of the country are still struggling.
So the Bush tax cuts will expire for the group most likely to spend money, including many local small business owners who are already paying more state excise taxes in growing highway tolls, and on their cable, utility, and trash bills.
Perhaps Obama is correct. He has done a poor job of explaining his proposals to the public. Maybe that's because too many proposals have been expensive and confusing. Take health care: I'd estimate that as many as 40 different bills have been debated in the last year.
The president was clearly back on message Wednesday night. But let's hope we get a simplified health care bill that does not significantly raise the deficit. Two wars and escalating Medicare, Medicaid and Social Security costs are taking care of that. Maybe business owners should encourage Social Security recipients to go back to work penalty-free. Maybe then they would spend more money — and create those much-needed jobs.
Email
ShareThis