Economic Outlook

Businesses Position Themselves for Obama's Second Term

By Matt Raymond
Published on March 14, 2013, 4:20am | Comments

Now that the dust has settled on the 2012 election, the fiscal cliff and budget sequestration, the business of governing in President Obama's second term is underway. Where that business is of the ''small'' variety, the administration is touting its accomplishments and looking ahead.

''We got capital into the hands of small-business owners and entrepreneurs when they needed it most,'' said Emily Cain, press secretary for the Small Business Administration.

President Barack Obama's 2nd Inauguration

President Barack Obama's 2nd Inauguration

''SBA supported more than $106 billion in lending to more than 193,000 small businesses and entrepreneurs'' and ''helped increase American competitiveness through an aggressive push around high-growth entrepreneurship.''

But new laws and proposals have small businesses wondering what's in store for the next four years.

One marquee change is the Affordable Care Act (ACA). The ACA's 35 percent tax credit for health premiums paid by qualifying small businesses will increase to 50 percent in 2014.

Under the law, many states will establish health care exchanges, with Small Business Health Options Programs (SHOPs) that are intended to increase coverage, offering a variety of plans and benefits. Proponents of SHOPs say greater competition, purchasing power, and lower administrative burdens will make them attractive options. According to the Kaiser Family Foundation, only 57 percent of businesses with 50 or fewer workers currently provide employee health benefits.

Companies with more than 50 employees will be required to provide health insurance to their employees or face penalties. To pay for some of the ACA's costs, an additional Medicare tax of 0.9 percent will be levied on wages or self-employment income of the highest earners.

Despite debates over the ACA, Justin Nelson, president and co-founder of the National Gay & Lesbian Chamber of Commerce, is bullish on its prospects.

''There is no denying the ACA will benefit small businesses, specifically the key provisions in the law that help them better afford insurance, such as tax credits and insurance exchanges, and those that contain costs,'' Nelson said.

Tax changes aren't limited to health care. The ''fiscal cliff'' raised the marginal tax rate to 39.6 percent from 35 percent for single filers who earn $400,000, targeting a small minority of business owners who file as individuals, such as S-Corporations. Even with that tax hike, experts say the predictability of a permanent extension of the overall Bush-Obama tax cuts will be good for businesses.

Corporate income taxes are another thing to keep an eye on. Lowering them has bipartisan support, but the devil could be in the details of which loopholes are closed to pay for them and how broad overall tax reform should be.

A survey by The Wall Street Journal found that 35 percent of small businesses might reorganize as C-Corporations if the corporate tax were cut. Because S-Corps and C-Corps offer varying advantages, tax reform could compel many businesses to break out their green eyeshades.

A grab bag of other laws and initiatives includes:

Proposals to make permanent the research and development tax credit, provide 100 percent exclusion of capital gains on qualified small-business stock sales, and extend 100 percent expensing of capital equipment purchases

The JOBS Act of 2012, which helps startup firms that want to go public or attract ''crowdfunding''

Proposals to raise the minimum wage to $9 or more from $7.25, and index it to inflation

''Small businesses continue to drive innovation and job creation in industries across the country,'' SBA's Cain said. ''Our goal is to make sure these entrepreneurs have the wind at their backs and the access and opportunity they need to grow their operations, reach new customers and create jobs in our communities.''

Winner of the 2012 NGLCC Chamber of the Year Award and ranked No. 18 for Local Chambers of Commerce in the Washington Business Journal's ''Book of Lists,'' the Chamber means business. For more information, visit caglcc.org.

Matt Raymond is a CAGLCC member, a PR professional and a D.C. advisory neighborhood commissioner.


Call 202-638-6830 to advertise here in Marketplace