Wider World of Business
President Obama's Re-Election Adds Certainty in Key Areas
By: Sarah E. Needleman, "http://online.wsj.com/article Wall Street Journal
The end of the presidential election brings greater certainty to many small-business owners in critical areas from health-care policy to taxes. Here's a look at what President Barack Obama's re-election might mean for them:
One campaign issue that business owners likely no longer need to question is the fate of the health-care overhaul.
Obama pledged to keep it intact. But this means that owners with 50 or more full-time-equivalent employees will be required starting in 2014 to provide their workforces with health-insurance benefits or pay a penalty. Also under the law, upper-income households will be taxed an additional 3.8 percentage points on their investment incomes beginning Jan. 1.
For Jesse LaFlamme, co-owner of Pete Gerry's Organics LLC, an egg-farm business in Monroe, N.H., the election results confirm that he will need to start providing health insurance to all of his 50 employees, and not just managers, as is currently the case. "We know what we now have to do going ahead," he says.
Tax policy is of significance to small-business owners, because many of them declare their business incomes on their personal tax returns.
In his campaign, President Obama said he would support extending the Bush-era tax cuts, due to expire Jan. 1, for couples earning less than $250,000 a year. He would allow them to expire for higher earners and also create a new minimum tax for people making $1 million or more. Ending the Bush-era cuts would increase the top tax rate on wages and salaries to 39.6%. The top rate on dividends for upper-income households would be higher — 43.4% — when the scheduled 3.8-percentage-point increase in investment-income taxes is included.
Whether the president succeeds will depend on whether he wins congressional approval.
Dan Hobin, chief executive and co-founder of G5 Inc., a digital-marketing-software firm in Bend, Ore., says he now expects his 125 employees to have to work harder because the business will likely be paying more in taxes. "It's going to cost us more," he says.
The so-called fiscal cliff was created last year in negotiations between Congress and Obama to lift the federal debt ceiling. It means that tax increases and deep spending cuts are set to take effect at year-end — that is, unless lawmakers and the White House can agree on a new deficit-reduction plan.
Both Democrats and Republicans have said they want to avoid much of the spending cuts, but they haven't succeeded yet in determining how to replace them. For example, the maximum tax on investment income is scheduled to rise from 15% currently to at least 23.8% on most capital gains. The pending increase is fueling sales of some privately held businesses by owners seeking to avoid that.
In the first three years of the Obama administration, small businesses were awarded $286.3 billion in federal contracts, about 22% of total contracting dollars, and a $32 billion increase over the previous three years, according to the Small Business Administration.
Although Republican Mitt Romney had proposed reducing federal spending to 20% of gross domestic product from the current 23%, Obama had said that he also favors spending cuts mixed with a proposed tax increase of $1 for every $2.50 in budget cuts, while maintaining investments in education and research.
The result could be fewer federal contracts for small businesses to rely on.
Obama has said that he will keep federal regulations on small businesses to a minimum by doing away with overly burdensome and outdated rules. However, the White House budget office counted 192 economically significant regulations in Obama's first 3.5 years, compared with 146 in the same stretch of President George W. Bush's first term, based on regulations published by executive-branch agencies and reviewed by the budget office.
Access to Capital
For business owners struggling to obtain capital, the Jumpstart Our Business Startups Act signed by Obama earlier this year could provide relief. It includes a provision allowing small businesses to raise as much as $1 million in equity funding over the Internet through so-called crowd-funding websites that will have to register with the Securities and Exchange Commission. The provisions go into effect as early as January, though delays are expected. But some critics warn that fraud could follow, with unsophisticated investors getting scammed. Whether the legislation will help entrepreneurs remains to be seen.
President Obama didn't go into detail during the campaign about how he plans to increase owners' access to capital. Instead, he focused on his track record in this area, such as improving terms and conditions of loans backed by the Small Business Administration.
Obama has said he plans to increase employment in part by supporting targeted tax breaks that encourage companies to expand in the U.S. and bring jobs home. His record, such as his support for the JOBS Act, also shows that he has supported measures aimed at helping startups and small businesses raise capital so they can grow and hire more workers.
Over the past four years, President Obama directed stimulus funds into renewable energy firms, including many green-tech startups. He also raised fuel-economy standards and slapped tougher restrictions on carbon-dioxide emissions.
During the campaign, Romney accused the president of spending some $90 billion on green energy in the form of grants and loan guarantees, including more than $530 million for Solyndra LLC, a failed solar-panel maker.
Along the campaign trail, the president said he supports government oversight of Internet-service providers that control the flow of online content to the Internet.
Small-business owners have raised concerns that without federal oversight, these providers could give faster service to websites owned by big businesses that better align with their interests. Angus Loten contributed to this article.