When President Obama recently revealed his $3.8 trillion budget proposal for 2014, it contained several provisions designed to support small business owners. This is not surprising, considering that small businesses account for 60 percent of job creation in the United States. However, there are also other stipulations that could potentially hurt small businesses that business owners need to be aware of as well. Here’s a breakdown of how the Obama 2014 budget may potentially impact small businesses.
In President Obama’s 2014 budget proposal, a one-time tax credit is established for small business owners who hire new employees and/or give raises to current employees. This credit would be equivalent to 10 percent of the amount paid (either to new workers or via raises), and those small companies that paid less than $20 million in wages in 2012 would be eligible for it.
On the other side, the proposed budget establishes a minimum tax rate of 30 percent for households earning $1 million or more annually, which could potentially negatively impact some small business owners. Those business owners who pay pass-through taxes on their business income may end up paying higher taxes (via the 30 percent tax bracket) than they would otherwise be accountable for based on their actual personal income.
Included in the Obama budget are $1.2 billion in cuts to certain entitlement programs, including Social Security and Medicare, over the next 10 years. This has the potential to negatively impact those small business owners (current and former) who rely heavily on these programs for their own retirement planning and budgeting.
President Obama has proposed to raise the minimum wage from $7.25/hour to $9/hour, which could have a major impact on small business budgets.
The Small Business Administration (SBA)
Under the budget proposal, significant cuts would be made to the SBA, eliminating 12 percent (or around $109 million) from their budget. However, the SBA would be allotted an additional $4 million in order to hire 32 government contract specialists whose aim would be to establish more small business government contracts. Other potentially positive impacts on small businesses include the streamlining of the application process for SBA loans, with fees for small business loans under $150,000 being waived.
Arora, Rohit. “What Does the Obama Budget Mean for Small Business Owners?” Small Business Trends. 4/25/13.