Obama Proposes Tax Credit for Small Businesses
Tax relief for small businesses that hired or gave raises to their workers last year is among the proposals that President Barack Obama revealed in his $3.8 trillion budget plan on Monday.
Obama's budget message for the fiscal year that begins Oct. 1 also contains proposals that would streamline the application process for Small Business Administration loans and increase the number of lenders working with the SBA.
The tax credit, aimed at giving small businesses an incentive to hire and raise employees' pay, would be for companies that paid less than $20 million in wages in 2012. They could get a one-time credit of 10 percent for the amount paid to new workers and in raises to current workers. There would be a limit of $5 million on the credit.
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The budget proposal allocates $810 million for the Small Business Administration, a drop of $109 million, or 12 percent from the 2012 budget. But Obama's proposal also repeats a suggestion he has made in the past, to include the SBA in a consolidation of agencies and programs that promote business and trade.
It also reiterated Obama's proposal to raise the federal minimum wage to $9 an hour from the current rate of $7.25, made in his State of the Union address in February. The minimum wage proposal has been criticized by small businesses that say they can't afford to pay their workers more.
Look at Key Proposals
Here's a look at some of the other proposals that would affect small business:
--Fees for what are known as SBA 7(a) loans would be waived for loans under $150,000.
--Small businesses would again be able to refinance what are called 504 loans. These loans are normally used to purchase or expand property. The Small Business Jobs Act of 2010 allowed for refinancings only through Sept. 30, 2012. The proposal would extend the refinancing provision through Sept. 30, 2014.
--The application process for SBA 7(a) loans would be streamlined under a $7 million program, SBA ONE, which is expected to increase the number of lenders working with the agency.
--The State Small Business Credit Initiative, a program created in 2010 to help foster lending to small companies, would get $2 million to increase the assistance it gives to businesses.
--The SBA would get $4 million to hire 32 employees who would work with federal agencies to increase the number of government contracts with small businesses.
--The proposal provides for $1 billion to start a network of 15 manufacturing innovation institutes across the country. They would be modeled after one in Youngstown, Ohio. Obama first proposed the creation of the network in his State of the Union address.
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The budget got mixed reviews from small business advocacy groups.
The National Federation of Independent Business criticized Obama's minimum wage proposal and said it would limit the number of jobs created by small businesses.
"Workers of all ages that are relatively unskilled are adversely impacted by this policy because they can't break into the job market, and small-business owners can't afford to create new positions for them," the NFIB said. The group focused on Obama's overall $3.8 billion budget proposal in its statement, and said it wouldn't do enough to lower the federal deficit.
Another group, Small Business Majority said it was pleased with Obama's proposal to give small businesses a tax credit for hiring employees and giving raises, and with its manufacturing initiatives. The group said those and other parts of the proposal would give small businesses economic opportunities and help them create jobs.