Small businesses emerge as big campaign issue for Democrats and Republicans

By Lori Montgomery and Michael D. Shear
Washington Post Staff Writers
Thursday, July 29, 2010

As President Obama and his adversaries look for winning themes in the run-up to the November congressional election, both sides are noisily clamoring to prove their support for a critical constituency: America's small-business owners.

At the White House, the president's advisers are urging Democrats to portray Republicans as supporters of big corporations unfriendly to the interests of the small, family-owned enterprise. On Wednesday, as he visited a sub shop in Edison, N.J., Obama chided the GOP for blocking his proposal to expand tax breaks for small businesses and make it easier for them to borrow money.

"Helping small businesses, cutting taxes, making credit available. This is as American as apple pie," Obama said. "Small businesses are the backbone of our economy. They are central to our identity as a nation. They are going to lead this recovery."

Republicans are blocking action on the bill in the Senate, even though several GOP senators support its provisions, as they angle for even bigger benefits for business, such as repeal of a hated new IRS reporting requirement included in Obama's health-care act and extension of a long-standing tax break for research and development that expired in January.

Meanwhile, Republicans are hammering Democrats over the rest of their agenda, arguing that the health-care act, the recent overhaul of financial regulations and Obama's plan to let tax breaks for the wealthy expire in January will hurt small businesses and hamper job creation.

"They've hit small business with a sledgehammer and now they're going to go around and say they're picking up some of the pieces," said Sen. Judd Gregg (R-N.H.), dismissing the small-business initiative before the Senate as "tinkering at the edges."

The bill, which Democrats hope to push to final passage before the August break, would give community banks access to a $30 billion government fund to encourage them to increase lending to small businesses. It would also beef up state lending programs and provide an array of tax credits to small businesses while excluding some small-business stock sales from capital gains taxes.

The House has already approved a similar measure. If the logjam breaks in the Senate, the bill could be sent to the White House before the House adjourns for the summer on Friday. But after Senate leaders failed again late Wednesday to agree on a plan for considering amendments to the legislation, a senior Democratic aide in the Senate said that is looking increasingly unlikely.

"Both parties claim to be friends of small business," Senate Majority Leader Harry Reid (D-Nev.) said. But "this is the proverbial stall that we've had all year."

Business groups such as the U.S. Chamber of Commerce and the National Federation of Independent Business support the Obama initiative but tend to agree with Republican criticism that it falls short of supplying what businesses need most now: a growing economy and certainty about their future tax burden.

"We think the bill is going to be helpful to small business," particularly the tax provisions, said Bill Rys, an NFIB spokesman. "But the one thing that would be most beneficial would be to extend" the tax cuts for high earners enacted in 2001 and 2003 that are set to expire this year.

"I don't think any small business should see their taxes go up right now," Rys said. He acknowledged that Obama's plan to raise the rates for the top two tax brackets would only affect a fraction of small businesses, but he argued that they are the largest firms, representing more than half of all small-business income, and therefore "the ones that are most likely to be hiring."

Far from backing down, the White House on Wednesday bolstered its case for letting the tax cuts expire, in a blog post by Christina Romer, chairman of Obama's Council of Economic Advisers. Meanwhile, Obama said in New Jersey that he has cut taxes eight times for small businesses, signing measures that created tax breaks for businesses that hire unemployed workers and allowed firms to write off more of their investments in new equipment. And while the health act would penalize businesses that do not offer their workers coverage, the smallest businesses are exempt from that requirement -- and eligible for tax credits to buy coverage if they choose.

Obama urged congressional leaders to pass his small-business bill "before they go on vacation."

"We've seen a fair amount of obstruction that's had more to do with gaining political advantage than helping the country," he said. "But surely, Democrats and Republicans ought to be able to agree on this bill."

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