Small businesses feel squeezed by Obama policies

By V. Dion Haynes
Washington Post Staff Writer
Monday, September 6, 2010

Last year, even as he struggled through the worst of the recession, Chris Upham said revenue at his District-based real estate and construction businesses doubled -- allowing him to hire two agents.

But Upham said he hasn't increased his staff thus far in 2010 and he doesn't expect to for the remainder of the year.

That's because his taxes rose sevenfold. And he said he anticipates they'll increase again if the Bush tax cuts for people earning $250,000 and above expire at the end of the year.

As small businesses try to plot their recovery, attention is turning to what many owners consider burdensome policies -- higher taxes, new accounting procedures and health-care mandates. Even as the government tries to help with an array of small-business initiatives, many owners say the intervention is as much a hindrance to hiring as the faltering economy.

Their perceptions are important because the Obama administration is counting on small-business owners like Upham, whose ranks represent more than half the U.S. workforce, to jump-start the economy, much like they did after downturns in the early 1990s and 2001.

"We did well last year, hired two people, but the taxes ate through the income we had," Upham said.

Upham said business picked up substantially with the Obama tax credit for first-time home buyers before dropping off when it ended. With the administration efforts, he said, he feels like he's taking one step forward and two backward.

"It seemed like we were moving up, [and now] consumer confidence is down," he added. "What I want government to do is not raise taxes -- decrease them to allow us extra money for hiring."

The White House appears poised to respond to a growing backlash from businesspeople about the crush of higher taxes. Among the ideas being explored were a temporary payroll-tax holiday and permanent extension of the expired research-and-development tax credit, ways to offset the impending elapse of tax cuts for the top 2 percent of households.

"I will be addressing a broader package of new ideas next week," President Obama said Friday at a news conference held to comment on the Labor Department's August unemployment data. The report showed weak economic growth -- 67,000 private sector jobs added in August, down from 107,000 in July -- and that the jobless rate ticked up to 9.6 percent from 9.5 percent.

The conventional wisdom is that small businesses would be willing to expand their payroll if capital were more readily available to them. Small businesses suffered more in the credit crunch than their larger counterparts because they rely almost solely on banks for their financing.

Last year, the Obama administration allocated hundreds of millions of dollars to increase loan guarantees and to reduce borrower fees for small businesses, classified by the government as firms with 500 employees or fewer. The program proved to be wildly popular: Before the money ran out last spring, the number of loans approved soared 90 percent.

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