The Agenda
How small-business issues are shaping politics and policy.
President Obama, in his speech Thursday before a joint session of Congress, promised to deploy the power of the federal government to induce small businesses to hire out-of-work Americans. But even some of the small-business owners who watched the speech live in the House chamber at the White House’s invitation said they would not be swayed by the carrots the president proposed to dangle.
David Catalano, who helped found Modea, a digital advertising agency in Blacksburg, Va., and Darlene Miller, who owns Permac Industries, a precision machining company in Burnsville, Minn., both said they planned to hire regardless of what the government does. “We’re going to hire based on our needs,” Ms. Miller said.
In his speech, the president outlined several tax incentives for businesses to prompt investment in general and to reward hiring in particular. The investment incentives, which would take effect in 2012, include cutting the employer payroll tax in half, to 3.1 percent, for the first $5 million in wages. The president would also allow companies to continue taking a full deduction for certain kinds of property purchases immediately, rather than having to amortize the expense over many years.
To reward hiring, the president proposed a full payroll tax holiday on up to $50 million in increased wages over what a company paid in 2011, regardless of whether the growth comes from new hires or salary hikes. The president also proposed a series of tax credits for companies that hire people who have been looking for work for at least six months: up to $4,000 for most employees, but up to $5,600 for veterans, and up to $9,600 for veterans injured during their service. It is unclear when the hiring incentives would expire. According to a White House spokesperson, the amount of the credit would depend on the employee’s wages and the number of hours worked.
Some economists have questioned whether such incentives really induce hiring and investment or simply reward companies for actions they would have taken anyway. But both business owners said that any extra boost would help. “This just eases the burden, to invest in their education, or do more things for them,” said Mr. Catalano. Added Ms. Miller: “It will definitely help small businesses with cash flow.”
While the proposals would benefit all businesses, not merely small ones, the White House said the payroll tax cut was directed toward “the 98 percent of firms that have payroll below” the $5 million limit. Some economists believe that the bonus depreciation, in particular, offers more help to large firms than small ones.
The president’s speech split advocates for small business along predictable lines. The National Federation of Independent Business, the conservative-leaning small-business lobbying group, panned it as “more of the same” in an e-mailed statement that cited “the threat of higher taxes and the thousands of pending federal regulations.”
“Small businesses need the government out of their way,” said Dan Danner, the group’s president and chief executive, in the statement. “Tax breaks are always a welcome help to small businesses, especially in these tough economic times. But those outlined tonight by the president are temporary, and avoid the question of meaningful business tax reform.”
The National Small Business Association, a more centrist organization, was more generous in its praise of the tax cuts. “Offering a payroll tax holiday can help all small employers — not just the profitable ones who benefit from an income tax cut — with some much-needed cash while at the same time making it a bit more affordable to bring on new employees,” said Todd McCracken, the group’s president and chief executive, in a statement. But the N.S.B.A. joined the N.F.I.B. in calling for a lighter regulatory burden for businesses and demanded a far-reaching overhaul of the whole tax code, not just for corporations.
These concerns resonated even with the president’s invited guests. Mr. Catalano said that he was wary of the president’s pledge to pay for the package by asking the “wealthiest Americans and biggest corporations to pay their fair share.” Mr. Catalano said that because his company was organized as an S Corporation, in which profits are passed through to shareholders, he would then face higher taxes. But, he said, “my partner and I have reinvested 100 percent of the profits that our agency has made over the last five years back into the company. If the government takes a bigger share of that from me, it directly impedes my ability to grow the agency.”
Ms. Miller said the president could have done more to address regulatory burdens. “There’s still a lot of work in that area to be done,” she said. “There are a lot of regulations that really just aren’t necessary.”
She also worried about the president’s call for higher taxes. But she added that even with her company’s profits, “I’m not the wealthiest, so it does not affect me directly.”
Article source: http://feeds.nytimes.com/click.phdo?i=24b119cfe852f122e6cbc68cf9511a01