President Obama’s 2015 Budget: What Small Business Owners Need to Know
President Obama unveiled a $3.9 trillion budget request on Tuesday that many view stands as a platform for Democrats to run on this election year, with policies intended to invite contrasts with Republicans rather than offer compromise. Republicans were quick to condemn the Obama budget for its proposed spending and tax increases. They will most likely succeed again in blocking much of it in Congress appropriations process, though Democrats have typically been able to salvage some of their initiatives.
Nonetheless, the proposed budget signals the administration’s shift in attempting to work across party lines to reign in spending and trim the national debt, the president is renewing his push to invest more money into programs he believes will jumpstart a sluggish economic recovery.
Our budget is about choices, it’s about our values, Mr. Obama said as he visited an elementary school in Washington, DC. As a country, we’ve got to make a decision if we’re going to protect tax breaks for the wealthiest Americans or if we’re going to make smart investments necessary to create jobs and grow our economy, and expand opportunity for every American.
Small Business which traditionally generate a majority of the nation’s new jobs have been repressed by weak consumer spending, along with increasingly complex tax systems and regulations. The proposed 2015 budget, which would take effect October 1, 2014 takes aim at alleviating some of those barriers to economic growth, however, not every enterprise stands to benefit. Below are some of the proposed changes that start-up and small businesses should expect to see under the proposed plan:
Lower tax rates Â President Obama’s plan intends to not to add to lower the national debt, so in order to pay for increased spending, the President has focused on decreasing tax breaks and corporate loopholes which benefit large businesses. For example, the budget would eliminate regulations that are commonly exploited by hedge funds and private equity groups and it will also end tax evasion tactics used by corporations that store profits overseas. Subsequently, some of the money saved would go toward the administration’s new spending initiatives including pullbacks on sequestration cuts and offsetting the nation’s corporate tax rate.
While many small businesses support the initiative to close loopholes long benefitting large enterprises, it is the lowering of the corporate tax rate where many have shown dissent. Most small businesses are structured as pass-through entities so that their owners pay the company’s taxes at an individual rate, not corporate. Consequently, many advise that lowering solely the corporate rate will put many small businesses at an even greater disadvantage because some entrepreneurs may lose access to certain tax breaks without seeing a reduction in their base.
Reductions in Spending for the SBAÂ President Obama’s plan calls for $710 million to run the Small Business Administration, a $100 million decrease from the SBA’s operating budget for 2014 and $200 million decrease from 2012. For the second year in a row, the Obama administration explained the decrease by pointing to improved economic conditions for commercial borrowers, which it expects to bring down default rates and lower the cost of the agency’s lending programs. As a result, the budget only provides $47.5 million to subsidize the departments loan programs, less than half it proposed to cover the programs in 2014.
Increased Federal Spending Â the proposed budget asks Congress to approve an additional $56 billion in stimulus spending beyond the $1 trillion that House and Senate leaders have settled on in the budget deal struck last year. This additional capital is expected to expand early education and job-training programs and finance infrastructure projects over the next four years across the country. The increased spending in these areas could potentially provide opportunities for small businesses; particularly those connected with the transportation and construction sectors.