Small firms await Obama moves

President Obama waves to supporters after his victory speech in Chicago. Many small-business owners were critical of him in his first term.
President Obama waves to supporters after his victory speech in Chicago. Many small-business owners were critical of him in his first term. (CHIP SOMODEVILLA / Getty Images)

In his second term, the president is looking at taxes and the budget deficit.

Posted: November 12, 2012

President Obama's reelection takes away some of the uncertainty small-business owners have been carrying around. The question now is whether he can satisfy those who say he has not done enough to help them expand and create jobs.

During Obama's first term, he pointed to steps such as proposing the Small Business Jobs Act of 2010, which cut taxes and made it easier for small companies to obtain federally guaranteed loans.

"We've been seeing steady, albeit modest, growth in the economy since the president took office, and we are cautiously optimistic," said John Arensmeyer, CEO of Small Business Majority, an organization that lobbies on behalf of small companies.

Even so, many small-business owners are critical of the president's performance and anxious about taxes and the bulging federal deficit. Many opposed the health-care overhaul and complain that they are being squeezed by excess regulation.

What can small-business owners expect from Obama in his second term? Observers offered these views:

Taxes. Expect the still-divided Congress to battle over Obama's request to raise the top tax rate on many business owners to 39.6 percent during 2013. That's the highest personal tax rate, which affects some small businesses because the owners report business taxes on their personal returns.

"I don't think anything's going to change," said Peter Cohan, a lecturer in entrepreneurial strategy at Babson College in Wellesley, Mass.

But Obama also is calling for the corporate tax rate to drop to 28 percent from its current 35 percent. Manufacturers would pay no more than 25 percent. And he's backing more liberal tax deductions for small businesses that invest in new equipment.

"Congress will be more willing to work with the president on these small-business-targeted tax policies," Arensmeyer said.

Health care. Obama's reelection means the overhaul will continue to be implemented, but small businesses still must wait to find out how much it will eat into profits.

Key provisions of the law go into effect in 2014, including the requirement that businesses with 50 or more employees provide affordable health insurance for their workers. What employers don't know yet is how much that insurance will cost. That won't be determined until states set up exchanges where individuals and companies can buy coverage.

Another big legal challenge to the law is unlikely, said Risa Lavizzo-Mourey, president of the Robert Wood Johnson Foundation.

Economy/federal budget. "I think both candidates were way overselling what they can do to create jobs and help the economy," said David Primo, associate professor of political science and business administration at the University of Rochester.

The federal deficit is part of the problem. Obama has to curtail spending, but if he cuts government projects, including federal contracts, small businesses may lose revenue and may have to cut jobs.

If the deficit isn't dealt with soon, though, taxes will have to rise, which would leave small-business owners with less money to invest in their companies.

"That is ultimately going to be a huge problem," Primo said.

Regulation. Look for Obama to continue a mixed record - creating more rules that small businesses will need to follow, but also being vigilant that regulations won't be too burdensome.

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