Washington Post reporter J.D. Harrison has outlined the primary components of the budget and what they would mean for small businesses. It’s a comprehensive analysis worth reading, in our opinion.
Below are a few highlights from the article for On Small Business:
“Obama’s plan would basically change the way entitlement benefits are adjusted for inflation. Using the new formula, those benefits would increase at a slightly slower rate than they do under the current system.
Coupled with plans to lower payments to providers and raise premiums for some patients under Medicare, the budget would trim about $1.2 billion in spending over the next decade from a range of federal programs.
In several polls, small-business owners have condemned plans to cut back on entitlements, even when pitched as an alternative to higher tax rates. Some elderly employers would be hit directly by the cuts, but the broader concern, they say, is that undercutting programs like Medicare, Medicaid and Social Security could shatter any semblance of consumer confidence, which could drive sales lower.”
“[Obama’s] budget limits certain tax deductions for high-income earners, sets a minimum tax rate of 30 percent for households earning more than $1 million annually, and calls for closing additional loopholes exploited by the wealthiest Americans. Interestingly, House Republicans called for eliminating some of the same tax breaks in their budget; however, their plan is to use the savings to offset lower rates across the board, whereas Democrats want a large portion of the additional revenue to fund government operations.
Several small-business lobbying groups have contested attempts to raise the tax burden on the wealthy, arguing that a large number of small employers pay pass-through taxes on their business income, placing them in tax brackets higher than those appropriate for their actual level of personal income. Increase their rates, they warn, and they will have less money to invest back into their firms and create new jobs.
Others have argued that only a tiny sliver of the small-business population would be affected by raising the top rates or eliminating breaks for the wealthy, and of those that do feel the impact, many are hedge funds and investment groups that don’t need the breaks lawmakers are purportedly directing toward Main Street.”
Small Business Administration
“The U.S. Small Business Administration would receive $810 million for the coming year under the president’s new proposal — $109 million less than the agency’s 2012 operating budget. Citing brighter economic forecasts, the administration expects fewer small-business owners to default on government-backed loans under the agency’s 7(a) program; thus the president expects the program to require less money to operate.
The budget would also eliminate fees for SBA loans under $150,000. In a conversation with members of the media on Wednesday, SBA Associate Administrator Jeanne Hulit noted that borrowing demand has started to recover after slipping during the recession, but not for small-dollar loans. The administration is hoping the fee waivers will help fill that lingering gap in the loan market.
Obama’s proposal would reauthorize the widely popular 504 Loan Refinancing program, too, which expired last September, much to the chagrin of the small business community. The temporary program provided attractive terms under which employers could refinance debt for property and other tangible assets, and many proponents have called for the program to be made permanent.”
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