2008 Presidential Candidates – How is SMB going to be affected?

One of my fellow Allbusiness advisors, Miranda Marquit is currently doing a series on her analysis of what the presumptive republican and democratic presidential candidates positions are on a variety of topics related to personal finance. I decided that it would be good to look at areas affecting small business owners, since the Small Business Administration reports that small businesses pay out over 45% of the US private payroll and they generated 60 – 80% of new net jobs over the past 10 years.

During my research, something I discovered is that neither Barack Obama nor John McCain has published many positions relating to small businesses. Those that are published tend to be vague, with no significant substance. It has been very hard to find “their words” related to the three topics I believe are currently most critical to small business owners, which are health insurance, access to capital, and taxes. I have scanned speeches and their websites to find the material I am using.

Today I am going to represent the best I can what the candidate’s stated position is related to taxes and financial matters affecting small businesses and their owners.

John McCain

Here are McCain’s positions as stated on his official website:
(my comments are in italics)

John McCain Will Cut Taxes For Middle Class Families. John McCain will permanently repeal the Alternative Minimum Tax (AMT) – a tax that will be paid nearly exclusively by 25 million middle class families. Repealing this onerous tax will save middle class families nearly $60 billion in a single year. Under McCain's plan, a middle class family with children set to pay the AMT will save an average of over $2,700 – a real tax cut for working families. (Many successful small business owners fall into the affected category.)

Regarding incentives for small business, McCain’s website says John McCain will improve business investment incentives. John McCain proposes to permit corporations to immediately deduct the cost of equipment investment, providing a valuable pro-growth investment incentive. Expensing of equipment and technology will provide an immediate boost to capital expenditures and reward investments in cutting-edge technologies.
(The benefit of expensing capital equipment purchases is there will be a much lower tax basis for the corporation than under current taxation rules. This could dramatically lower a small corporate tax obligation or the owner’s if the entity is an LLC or S corp.)

John McCain Will Ban Internet Taxes. John McCain has been a leader in keeping the Internet free of taxes. As President, he will seek a permanent ban on taxes that threaten this engine of economic growth and prosperity.

John McCain Will Ban New Cell Phone Taxes. John McCain understands that the same people that would tax e-mail will tax every text message – and even 911 calls. John McCain will prohibit new cellular telephone taxes.
(cell phones are necessary in every business and account for a reasonably large expenditure, banning new cell phone taxes could have a significant impact to business owners.)

John McCain Will Establish Permanent Tax Credit Equal To 10 Percent Of Wages Spent On R&D. This reform will simplify the tax code, reward activity in the U.S., and make us more competitive with other countries. A permanent credit will provide an incentive to innovate and remove uncertainty. At a time when our companies need to be more competitive, we need to provide a permanent incentive to innovate, and remove the uncertainty now hanging over businesses as they make R&D investment decisions.

(Such tax credits would incentivize small business owners to spend more on R & D, thus improving the business’ chance of success as well as benefiting our economy.)

Barack Obama

Here are Obama’s positions as stated on his official website:
(my comments are in italics)

Provide Tax Relief for Small Businesses and Start Ups: Barack Obama believes that we need to reduce burdens on small business owners, many of whom are struggling to succeed as health care and energy costs continue to skyrocket. Barack Obama will support small business owners by providing a $500 “Making Work Pay” tax credit to almost every worker in America. Self-employed small business owners pay both the employee and the employer side of the payroll tax, and this measure will reduce the burdens of this double taxation. Barack Obama will also eliminate all capital gains taxes on start-up businesses to encourage innovation and job creation.

(This could potentially save small business owners if the tax credit offsets the employer’s contribution to FICA.)

Support Innovation and High-Tech Job Creation: Barack Obama believes we need to double federal funding for basic research, diversify energy sources, expand the deployment of broadband technology, and make the research and development tax credit permanent so that businesses can invest in innovation and create high-paying, secure jobs.

(In my opinion, most “Main Street” businesses would not be affected by this, but businesses involved in creating new technology would.)

Create a National Network of Public-Private Business Incubators: Barack Obama will support entrepreneurship and spur job growth by creating a national network of public-private business incubators. Business incubators facilitate the critical work of entrepreneurs in creating start-up companies. They offer help designing business plans, provide physical space, identify and address problems affecting all small businesses within a given community, and give advice on a wide range of business practices, including reducing overhead Paid for by Obama for America costs. Business incubators will engage the expertise and resources of local institutions of higher education and successful private sector businesses to help ensure that small businesses have both a strong plan and the resources for long-term success. Obama will invest $250 million per year to increase the number and size of incubators in disadvantaged communities throughout the country.

(In my opinion, the existing start up business incubators I am familiar with do a good job helping get new businesses going, so increasing the funding for more incubators could increase a new business’ chance of success.)

Promote Digital Inclusion: The lack of affordable, high-speed Internet access in rural, urban, and minority communities has created a digital divide between those who have access to the Internet and those who do not. This severely limits the growth potential of many urban and rural companies.

(This is a very real issue for many “Main Street” businesses and does need to be addressed)

Support Rural Small Businesses: Barack Obama cosponsored the Emergency Farm Relief Act of 2006 to direct the Secretary of Agriculture to make grants to state agriculture departments or comparable agencies in qualified states for direct economic loss payments to eligible small businesses.

(When researching this bill, I determined it never became law having died when congress closed their session. The same bill had been introduced in two previous sessions by other senators and it also died when the session closed.)

It should always be remembered that our President can encourage and support legislation, but he or she doesn’t pass it. Both Houses of Congress would have to pass most of the initiatives proposed or supported by any president in their campaign rhetoric.