Obama and GOP Small-Business Tax Showdown: Businesses Owners React
The White House and the GOP proposed dueling tax cuts for small businesses earlier this week, and business owners are hoping that they'll get the spoils whoever the victor is. On Tuesday, President Barack Obama sent the Startup America Legislative Agenda to Congress, proposing four tax breaks, including a 10 percent income tax credit for small businesses that create jobs or increase wages in 2012, elimination of taxes on capital gains for small-business investments, and extended deductions for startups and equipment. The agenda also included four proposals to expand capital -- including an "IPO on-ramp" to ease some SEC regulations for small companies in their first years post-IPO, crowdfunding support and boost in the limits of "mini-offerings" from $5 million to $50 million -- as well as a provision to address immigrant visa backlogs. "My expectation and hope is, is that they will get a bill together quickly, that they will pass it and get it on my desk," Obama said. "I will sign it right away, and I would like to see that bill signed this year."
On Wednesday, the House GOP followed up by introducing its own small-business tax bill, proposing a 20 percent tax cut for businesses with fewer than 500 employees. "I hope every Democrat will join us in passing the small business tax cut by April 15," said House Majority Leader Eric Cantor, R-Va.
We asked HuffPost Small Business bloggers what they think about the proposals and whether they expect these partisan challenges to result in bipartisan action that will actually help small businesses.
Christopher Hytry Derrington
Chief Executive Officer
Rural America Onshore Outsourcing Inc.
"I commend both parties for their focus on helping small businesses. Frankly, startups and emerging growth technology companies need more than just tax cuts to create jobs. They need greater access to cash from investors. President Obama's current package is a stronger dose of needed cash medicine that will help the start and growth of small businesses, which provide millions of American jobs every year. I strongly emphasize that revisions in the SEC rules about crowdfunding will be game-changers in enabling early stage companies to raise investment capital from individual investors. You should also contact your congressional representatives to ask for the inclusion of $250 million for the National Rural America Jobs Creation Plan (http://ht.ly/8OEq8) to create jobs for millions of rural Americans."
Author, "The Four Steps to the Epiphany"
"I think this was a great package -- a bipartisan way to try to make small-business more effective. I thought a number of items were wonderful -- the tax credit, the elimination of capital gains of small-business investments, the IPO on-ramp and the mini offerings were great. Do I think these were great for the country, good for small business? Sure. It's a diferent question of whether Congress will pass it.
"The Startup America Initiative finally organized people who understand entrepreneurship in a nonpartisan way to give recommendations to the government to fix some stuff that's broken. It's a good start for making government more responsive to job creation rather than just job death, which government bureaucracy and inefficiency usually does. It looks like a package put together by people who actually knew what they were talking about. They're good for both Main Street and Silicon Valley entrepreneurship -- they seem to understand both. That's a great head start. There's now a voice that has access to the White House that can represent the needs of both."
"Wealth Without Wall Street: A Main Street Guide to Making Money"
"On one hand, I am thrilled. The sectors that impact IPOs have little impact on Main Street but the tax credit and capital gains elimination do. The doubling of startup deductions from $5,000 to $10,000 really helps small businesses of every kind. Since Republicans favor tax cuts, especially in an election year, I can see these provisions getting through Congress.
"On the other hand, the major problem that small businesses face is getting access to financing. Banks, especially the 'too big to fail' banks that were bailed out by taxpayers, are not lending money to small business or making it nearly impossible to get any kind of loan. The focus needs to be on Wall Street banks acting like banks, instead of acting like casinos. All the small bankers I talk to say that Dodd Frank is making it difficult to stay in business. It takes a large percentage of their overall revenues to comply, and unless we give smaller banks some relief or possibly financial assistance, we are headed toward a situation where there will be no more small banks.
"Although it seems like 'Christmas in February' for Main Street as both parties race to pander to us, they are both missing the overall point. Main Street needs financing and access to capital. Tax cuts are secondary. If a business makes a minimal profit, or can't stay in business, due to lack of financing, tax cuts are irrelevant. Tax cuts only help people who have lots of income to begin with.
"I suspect we are going to wind up with a tax cut that we don't really need and still lack access to credit that we need desperately."
Small-business management columnist, author, speaker and business owner
"The effect on my company:
- Eliminating tax rates on capital gains for investments in small businesses: My company is an LLC and there are two shareholders (my wife and myself). We're not looking for any investors now or in the future.
- Extending the 100 percent first-year depreciation for one year for qualified property: My company sells software and services. We have no fixed assets/equipment per se. However, this is a big benefit for us because the products that we sell to our customers would fall under this rule, so it's definitely a demand generator. Now if we could find a way to tax Microsoft for every bug we encounter, I could really consider early retirement.
- A 10 percent credit for small businesses that add jobs or increase wages in 2012: Sure, I'll take it. Why not? Oh, and while you're at it, can I have a cookie every time I'm able to collect an invoice in under 30 days? And some gummy worms whenever I finish a project under budget? I hate it when the government is giving me incentives to add jobs or increase wages. Just like I hated it when my mommy told me to wear a winter coat outside in February. At some point, I was able to figure that out on my own.
- Eliminating country specific caps for some immigrant visas: No effect on me. We outsource our development work to the Ukraine. I do sympathize, though -- after seeing 'Hostel,' I know fully well why people want to immigrate here.
- Making it easier to go public, raising the limit for 'mini-public offerings' to $50 million from $5 million: Despite the dozens of calls I receive every day from Wall Street firms, we have no immediate plans to go public. However, this could be a positive impact on some of our clients and prospective clients who are looking to do so, which in turn could provide them more capital to purchase the stuff I sell.
"Here's what I'd like to see:
- Stop with the election year gimmicks and extend Bush's tax credits indefinitely. That would tell the business community (including those awful, terrible SOBs who are earning more than $200,000 per year) that this administration truly commits to a long-term environment of lower taxes to promote growth. Once that occurs, many of my clients will sigh in relief and have the incentive to make their own long-term investments in people, property and equipment.
- A $50 tax on any viewer who willingly watches 'Keeping Up With the Kardashians.' We must end this madness and we must end it now.
"As a small-business owner, writer and advocate, I say: enough about small business! A lower tax environment for all businesses benefits small businesses. It's OK for the big guys to pay lower taxes, too. Trust me, they'll return their savings by way of investments, higher salaries and other capital spending that will no doubt affect the millions of small businesses that are their suppliers. Corporations (big and small) are people. I think I heard someone say that somewhere."
WATCH: President Obama conveys small-business strategy via Google +