For numerous small business owners who are being heavily affected by the current economic turmoil, the road ahead remains tough. Though the Fed (with a lot of help from the media) has been all too happy to call an end to the U.S. recession, the statistics paint a grimmer picture: the rates of unemployment, home foreclosures, and bankruptcy filings are all soaring. This comes as the credit markets remain tight and the cost of health care continues to prohibitively climb.

With all the focus being heaped on government-sponsored economic stimulus, it would seem that the issue of small businesses should be front and center. After all, small businesses in the U.S. account for half of the GDP and over half of the nation’s employment. Shouldn’t the Administration in the White House be concentrating on easing the burden for the nation’s smaller companies?

So far real help has been slow in coming, and this raises an important question: Is President Obama really concerned about the plight of small businesses?

The answer, in my opinion… not enough.

Let’s look at the facts:

In a previous post, I pointed out that government money did not seem to be reaching the small businesses who needed it the most. But underlying this article was the fact that it was Senators John Kerry (D-Mass.) and Olympia Snowe (R-Maine) who worked to secure the 45% funding increase for the SBA’s core small business programs in the first place. Under the President’s plan, several small business loan programs were effectively reduced or nixed completely.

And then there is the recent annoucement that the Administration will ask Congress to raise the loan limit on the 7(a) lending program to $5 million; on the 504 program from $4 million to $5.5 million, and on the microloan program to $50,000.

This was a blatant nod to Republican Senator Snowe, whose support is crucial to the Administration in the area of health care reform- President Obama’s pet project. This seems more like political maneuvering rather than a serious commitment to helping small businesses.

In order to truly hasten an economic recovery, Obama may need to re-evaluate his interests and start showing small business owners and their employees that he cares.

After all the politicking, President Obama finally signed into law last week the $787 billion recovery package designed to give a much needed boost to the U.S economy. Contained in the hundreds of provisions and over 1,000 pages of this bill are many opportunities for small businesses. You just need a little patience to sift through it all. To get you started I compiled a summary of a few of the provisions that may benefit many small business owners. (Both the NY Times and the Wall Street Journal have more detailed summaries of the recovery package online.)

• Increase deduction on capital investments. Businesses can recieve a 50 percent bonus deduction on capital investments made in 2008 that would normally be depreciated over many years. Businesses can choose to accelerate refunds of research and development credits and alternative minimum tax credits in lieu of bonus depreciation.

• Allow more small business deductions. Allow businesses to deduct up to $250,000 for capital investments made in 2009, with a total cap of $800,000. The limits were temporarily increased by Congress last year for investments made in 2008. Prior to that, small businesses could write-off $125,000 for capital expenditures, with a total cap of $500,000.

• Delay recognition of certain cancellation of debt income. Allow some businesses to defer tax on income that is recognized when they buy back their debt at a discount.

• Expand net operating loss carry-back provision for small businesses. Allow small businesses with annual receipts under $15 million to cut taxes by writing off

• Expand the tax break for small business stock sales. Allow small businesses to exclude up to 75 percent of the gain from the sale of some stock held for more than five years. 

• Develop business in depressed communities. Increase funding for state-wide programs that provide incentives for businesses to locate in economically distressed communities.

• Expand use of industrial development bonds. Allow small-issue industrial development bonds for “creation of intangible property” in the next two years. Industrial development bonds are tax-exempt bonds issued by a state or local government to finance manufacturing or production of “tangible personal property.”

• Incentive for advanced energy investment. Establish a new 30 percent investment tax credit for manufacturers of advanced energy property, which may include technology for the production of renewable energy, energy storage, energy conservation, efficient transmission and distribution of electricity, and carbon capture and sequestration.

• Support battery manufacturing. Provide grants to manufacturers of advanced battery systems and car batteries in the United States.

Aside from these provisions, several other provisions may indirectly effect small businesses. Some examples include: improvement in transportation and clean energy initiatives, the repair of facilities on public lands and parks, the repair and modernization of public housing units as well as abandoned and foreclosed homes. Small businesses could benefit by securing government contracts directly or assisting the bigger companies that secure them.

Image credit: Flickr user

[image source: Anthony Baker]

With a sputtering economy and an uncertain future, issues such as tax reform, health insurance, and worker’s benefits are weighing heavy on the minds of entrepreneurs and small business owners. For many, how the candidates for the US Presidency stand on these issues alone can be the deciding factor come voting day.

So who is the favored among small business owners?

Though both Obama and McCain have been pledging their support to established and up-and-coming small businesses, a close look at their policies reveals sharp differences in strategy and mindset.

If elected, Obama pledges to eliminate the capital gains taxes on start-up and small businesses as well as offer a $500 credit to self-employed small-business owners to offset the self-employment tax. He also plans on freezing the dreaded estate tax rate at 45% .

To encourage entrepreneurship, Obama wants to further develop a network of business incubators in communities throughout the nation with an emphasis on disadvantaged neighborhoods.

Many of Obama’s policies are actually more focused on the workers themselves. He plans on raising the national minimum wage from $6.55 to $9.50 an hour and requiring all employers to automatically enroll workers in 401(k)s or IRAs. Obama would further require all employers to either offer a health plan, contribute money to a worker ’s health costs, or pay a percentage of payroll to a national public program. Obama also supports the right of workers to bargain collectively and strike without fear of losing their jobs.

While many of Obama’s policies may be good for the average worker, it puts an added strain on businesses that are already seeing their bottom lines erode as the price of commodities and healthcare continues to skyrocket and the financial markets limp along. Such a strategy can make it harder for small businesses to hire and hold on to talent.

On the other hand, McCain’s platform appears more friendly to small businesses.

He plans on granting small businesses an immediate deduction on the cost of new equipment and technology purchases. He also wants to establish a permanent tax credit equal to 10% of the wages spent on R&D. Further tax reforms include: Reducing the corporate income tax rate to 25% from 35%; cutting the estate tax rate to 15% and increasing the exemption to $5 million.

In the area of healthcare, McCain pledges to make healthcare coverage less employer-centric by issuing tax credits allowing individuals to purchase personal, portable health insurance that will stay with the person even with a change in job.

McCain also supports a ban on Internet taxes as well as any new cell phone taxes.

According to a recent survey conducted by Suffulk University, many small business owners feel that McCain will better suit their interests.

Who will you be voting for in November?