Has the Obama Administration Helped or Hurt Small Businesses?

6:03 PM, Oct 15, 2010   |    comments
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Gannett Washington Bureau

WASHINGTON - Among the debates raging in this year's election is whether the Obama administration has helped small-business owners or made life more difficult for them.
Republicans say health care reform legislation and other measures enacted during President Barack Obama's tenure have increased the federal regulatory burden on small businesses. And they say those businesses still don't know if Congress will extend Bush-era tax cuts before they expire Dec. 31.

The White House insists it has helped small businesses, pointing to targeted tax cuts and small-business lending measures as well as a new tax credit for small employers who offer health insurance to employees. The Small Business Jobs Act of 2010 signed into law last month contained 16 tax cuts for small businesses.

The policy debate is difficult to follow for many small-business owners who are focused on their daily operations.

And it doesn't directly address lost sales, the No. 1 issue for small businesses, according to surveys by the National Federation of Independent Business, the nation's largest trade group for small businesses.

Sales won't recover until the economy is growing again at a healthy rate.

Elias Sarkis, owner of SoHo Bagel Cafe in Greece, N.Y. said his business has dropped 20-25 percent as he competes for walk-in customers with nearby restaurants offering reduced-price breakfast and lunch specials. He and his wife Eileen have compensated by increasing wholesale sales of fresh bagels to universities, hotels, company cafeterias and caterers.
His take on what's happening in Washington?

"I think it's all very negative,'' Sarkis said. "They should be ashamed of themselves. They spend money they don't have. They imposed programs that aren't funded.''

Three years ago, Sarkis decided he couldn't afford to keep paying 100 percent of health care premiums for his six full-time employees. He proposed paying 50 percent, but none of the employees agreed, so he dropped health insurance for everyone except his family.

Sarkis doesn't know the details of the new health care reform law, but he doesn't think the tax credit it offers companies that insure workers will change his policy.

"I don't want a credit,'' he said. "I want responsible spending.''
Susan Eckerly, senior vice president at NFIB, faults the administration and Congress for spending too much time on health care reform over the last two years, leaving little time for the economic challenges facing small businesses.

"I would give them an F on priorities,'' Eckerly said, noting that the Small Business Jobs Act of 2010 should have been enacted much sooner.

Brian Deese, special assistant to the president on economic policy, defended the administration's performance, noting that some provisions in the Small Business Jobs Act were part of the economic stimulus package enacted last year shortly after Obama took office. The package temporarily waived Small Business Administration application fees and established a fund for more SBA loans. Both provisions expired over the summer but were renewed by the small-business law.
White House officials also say they requested the small-business legislation months before the Senate finally passed it. Senate Democrats failed several times to break Republican filibusters that delayed passage.

Here's a breakdown of the administration's small-business record in several key areas:

Health care
Administration officials say the new health care reform law contains one key small-business provision: a $4,000- per-employee tax credit for firms with 25 or fewer employees to offset the cost of offering insurance to employees. The Treasury estimates 4 million firms are eligible.

Starting in 2014, small businesses can participate in health exchanges that offer lower-cost group premiums. And employers facing skyrocketing health insurance premiums next year can appeal those increases to their state insurance boards.
Republicans say the health care reform law requires employers to provide health insurance coverage to employees or pay a fine, which they say is equivalent to a new tax on small businesses.

They also note that the $4,000 tax credit begins to phase out for employees making more than $25,000 and doesn't apply to those making more than $50,000. Also, companies with more than 25 employees aren't eligible.
Administration officials and Republicans agree on the need to fix a requirement that, beginning in 2012, all businesses file a Form 1099 with the Internal Revenue Service for sales of goods or services of $600 or more. Many Republicans favor repeal. Senate Democrats voted unsuccessfully last month to exempt businesses with 25 or fewer employees and raise the threshold to $5,000.

Tax cuts
The administration points to the 16 targeted tax cuts in the new small-business law, including one that eliminates capital gains taxes for investments in small businesses and another that allows firms to deduct up to $250,000 in capital equipment purchases. Congress also passed the HIRE Act, which waives payroll taxes for any new hires previously unemployed for 60 days or more.

Republicans claim a major reason business owners aren't hiring or investing is that they don't know what the tax rates will be next year. The estate tax was phased out this year but returns next year.

Republicans say the estate tax hurts small businesses. But independent tax analysts say that under the threshold favored by the administration, only a tiny percentage of small businesses and family farms would have to pay the tax. The administration favors exempting the first $3.5 million in assets for an individual and $7 million for couples, with a 45 percent tax rate for assets beyond those amounts.

The administration's position on the Bush era tax cuts is that they should be extended permanently for individuals earning up to $200,000 and couples earning up to $250,000. The White House also favors allowing the top tax rate on capital gains and dividends to increase from the current 15 percent to 20 percent.
Congress is expected to vote on the tax cuts during a lame- duck session after the election.

The small business law increased SBA loan limits and established a fund that makes $30 billion available to banks at a lower interest rate if they boost their lending.
Congressional Republicans opposed the loan fund. Some described it as "TARP Jr.,'' a reference to the Trouble Assets Relief Fund pushed by the Bush administration to restore liquidity to credit markets in late 2008.
Trade policy

The Obama administration says its goal of doubling exports over the next five years will help small businesses by increasing U.S. trade missions and trade promotion efforts businesses can participate in. Business owners can get more information by contacting the SBA, the Commerce Department or the Export-Import Bank. The administration also says it's committed to reforming export controls, which have hampered overseas sales by some high-tech firms.

Many Republicans advocate passing trade agreements with South Korea and other countries that have been pending since the Bush administration left office

Gannett ContentOne - Washington, D.C.

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