So who is that candidate? Small business owners haven’t reached a consensus. Romney held a significant lead in the most recent survey of small business owners, while several similar polls have given the edge to Obama.
But the political issues that impact small businesses are much more clearly defined. Several studies have shown that entrepreneurs are particularly concerned about burdensome regulations, unstable tax rates and health care costs — but that’s only the beginning. Here, we break down where Obama and Romney stand on the most critical issues for entrepreneurs and small business owners heading into the election.
The presidential candidates and their running mates have emphasized stark differences in their tax plans, particularly concerning the expiration of the Bush-era tax cuts and the “fiscal cliff.” The president supports extending the current tax cuts for the middle class but allowing them to expire for families earning upwards of $250,000 a year. Romney wants to extend the breaks for all Americans, and one of his key arguments centers on the detrimental effects raising the top tax rates could have on small business hiring.
His campaign points to research suggesting that roughly one million small firms would see their rates increase under the president’s proposal, potentially costing the economy more than 700,000 jobs. Obama’s camp has repeatedly fired back that those one million firms account for only 3 percent of all small businesses and that many of them are hedge funds and law firms that don’t necessarily need relief.
Meanwhile, the president says he has already cut taxes for small businesses 18 times, though many were extensions of previous breaks and most have already expired. Obama has also proposed extending payroll tax cuts, which would help many small business owners who pay both employee and employer payroll taxes.
Romney hopes to pursue more comprehensive tax reform. He has pledged to lower individual tax rates by 20 percent and cut the corporate rate from 35 percent to 25 percent by closing oft-exploited tax loopholes, though he has remained tight-lipped on exactly which loopholes.
On health care
The National Federation of Independent Business has listed health care costs as the top concern for small business owners every year for more than three decades, and the cloud of uncertainty hanging over the new health care law has done nothing to move the needle. On one side, the president has repeatedly reassured business owners that they come out ahead under the law, which will eventually create small business health care exchanges that the administration says will provide more affordable options to small employers.
The health care law also provides a tax break of up to 35 percent of small employers’ contributions toward staff health insurance premiums through the end of 2013, and the break increases to 50 percent in 2014. However, since the law was passed, only a small portion of eligible firms have taken the government up on its offer.
Romney wants to repeal and replace Obamacare, despite the fact he passed a similar law as governor of Massachusetts. He believes health care decisions should be left to the states and, if elected, he plans to provide waivers to each state before working with Congress to toss out the law altogether.
His campaign has criticized the law’s requirement that businesses with 50 or more employees provide basic health benefits to their workers or pay a penalty. Critics have argued the mandate will force businesses to spend resources on health coverage they don’t necessarily want or need, adding that it could deter some companies from hiring beyond the 50-employee threshold to avoid the health care requirements.
While his plans for Obamacare are crystal clear, Romney has provided scant details about his own plans for health care reform. However, he has noted that small businesses should be allowed to pool together to purchase more affordable insurance plans.
Obama and Romney have both said regulations are an important part of any stable free market system, but when it comes to red tape, that’s where the agreement ends. Romney has criticized the president for implementing more than 100 major federal regulations over the past four years and says he plans to roll back Obama-era laws and regulations that are holding back business growth.
Most notably, Romney hopes to repeal Dodd-Frank, Obama’s Wall Street reform law, and amend the Sarbanes-Oxley financial reporting law to alleviate some of the regulatory burden on mid-sized businesses.
But Obama’s regulatory contributions have not all been denounced by the small business community. The JOBS Act, which allows entrepreneurs to seek “crowdfunding” capital from a wider base of investors, has been celebrated by entrepreneurs for potentially revolutionizing the way start-ups find early-stage financing. Under his watch, the Small Business Administration also eliminated several hurdles and a ton of paperwork for small business lenders, simplifying the borrowing process for small firms.
But the president recognizes too much red tape is still slowing businesses across various industries, and in January, he issued an executive order requiring agencies to conduct periodic reviews of all existing rules and regulations. He specifically asked officials to address those rules that appeared to be inhibiting job creation.
A sudden decline in immigrant entrepreneurship and a shortage of highly skilled workers has heightened concerns that the country’s strict immigration laws are holding back its economic recovery, and on this particular piece of the immigration issue, there is a great deal of overlap between the candidates’ proposed solutions. For instance, Obama and Romney support legislation that allows foreign-born entrepreneurs who start companies and create jobs in the United States to continue living in the country.
The president has also backed a program allowing foreign investors and their families to secure green cards if their investments in United States businesses create at least 10 jobs for Americans. Romney has proposed raising the overall and country-by-country caps on highly skilled immigrants and offering permanent residency to any foreign-born student who earns an advanced degree in math and science fields from a U.S. university.
So while they diverge on how to handle illegal, undocumented workers (Romney’s plans are generally far more strict), the two candidates agree that the United States must find better ways of welcoming the brightest young professionals from around the world.
On government contracting
Obama hasn’t shied away from investing tax dollars into the growth of U.S. businesses, but oddly, his record on small business contracting is mixed. On one hand, he signed a long-term extension of two federal programs requiring agencies to commit a portion of their research budgets to small firms, and he later demanded procurement officials cut by half the amount of time it takes to pay small contractors.
On the other, the federal government fell short of its small business contracting goals during each of his first four years in the White House. The president also shot down a proposal this summer to increase the amount of federal spending allocated to small businesses.
Romney hasn’t outlined his government services plans, but his broader spending agenda suggests firms who rely on government contracts may need to seek additional revenue streams. The Republican challenger has vowed to slice government spending from its current mark of 24.3 percent of GDP to below 20 percent en route to a “simpler, smaller, smarter government.” However, Romney’s campaign did tell the Associated Press that he “is committed to ending favoritism in goverment contracts” that sometimes gives competitive advantages to unions over other contractors, including small businesses.
On the SBA
Responding to exceptionally high demand for small business support in the wake of the recession, Obama equipped the Small Business Administration with unprecedented resources during his first term. The president nearly doubled the agency’s budget and added a number of targeted programs designed to help small firms of all types weather the sluggish economic recovery. Then in January, he elevated the head of the agency to cabinet-level status.
But would Obama continue to expand the reach of the agency over the next four years? Not necessarily. He has asked Congress for permission to merge the SBA with several other commerce-related agencies, but lawmakers have yet to grant him the go ahead.
Should Romney win the election, his proposed spending cuts wouldn’t simply trim the amount of government contracts — they would also extend to agency budgets. Romney says he would cut discretionary spending for all arms of the government except the military on his first day in office, which would include a 5 percent cut to the SBA’s federal funding.
A little less money for the agency would likely mean a little less government-backed small business lending, which could mean a few less entrepreneurs finding the capital they need to start of grow their businesses.
A sputtering economy and deflated consumer confidence have driven companies of all sizes to try to tap into foreign markets over the past few years. Hoping to expand the flow of U.S. goods to buyers overseas, Obama last year negotiated free-trade agreements with Colombia, South Korea and Panama and later made progress on the proposed Trans-Pacific Partnership, which would create enhanced trade partnerships with several countries in the Pacific. His administration is also on pace to meet its goal of doubling U.S. exports by 2015.
Meanwhile, the president has taken steps to make sure small businesses aren’t left out in the cold. The JOBS Act included a new SBA program designed to help small firms locate and conduct business with buyers and sellers abroad, and in May, Obama reauthorized the Export-Import Bank, which provides government-backed loans to foreign companies that purchase U.S. goods.
Romney has criticized the president on a number of trade policies, namely those concerning U.S. relations with China, but the Republican challenger has thrown his support behind the Trans-Pacific Partnership. He also wants to build what he calls the “Reagan Economic Zone” — a consortium of nations committed to open markets. He says he’ll extend an invitation to China, hoping to encourage its leaders to roll back their “abusive commercial practices.”
And while he hasn’t specifically outlined plans for bolstering small exporters, Romney emphasizes on his campaign website the importance of ensuring “that our entrepreneurs can sell their high-quality products and services around the world.”
Share your take: Which issues are the most important to your business this election season?
Follow J.D. Harrison and On Small Business on Twitter.