Obama's Budget: What's In It for Entrepreneurs
From raising the minimum wage to cutting paperwork on government-backed loans, the new White House budget includes a number of proposals likely to be of interest to small-business owners.
Obama’s 2014 budget, released today, months later than it should have been, has already met stiff opposition from both sides of the aisle. In an effort to bring Democrats and Republicans to the table, Obama included provisions that both sides strongly dislike. While the budget as it was stands today is not expected to pass, it does serves as a key launch pad for negotiations.
Here is a rundown of what is included in the budget that could affect your business:
1. A minimum-wage increase. Obama reiterated his intent to raise the federal minimum wage to $9 an hour, up from $7.25 where it currently stands. Many small-business advocates, including the right-leaning National Federation of Independent Business, do not support raising the minimum wage. The NFIB says raising the minimum wage would disproportionately impact small-business owners who employ the majority of minimum-wage employees and who also don’t have the capital reserves to absorb an increase in labor costs.
2. More than a dozen innovation-manufacturing centers. Obama proposed a one-time investment of $1 billion to launch fifteen advanced-manufacturing centers across the country. In his State of the Union address, Obama pointed to the 3D-printing manufacturing innovation hub in Youngstown, Ohio, as an example of the kind of innovation epicenter he wanted to emulate.
3. The “Buffett Rule.” President Obama reiterated his interest in passing the “Buffett Rule,” named for Warren Buffett, the chairman and CEO of investing behemoth Berkshire Hathaway, who has pointed out that he pays a lower tax rate than his secretary. The rule, which the Senate passed about a year ago, would institute a minimum tax of 30 percent on all individuals with incomes over $1 million. The Washington, D.C.-based International Franchise Association has said that the rule would hit its members, preventing them from growing and hiring.
4. A tax cut for small-businesses that hire. The job market has recently shown fresh signs of weakness. In March, employers added only 88,000 jobs, below the average of 169,000 jobs added each month in each of the previous 12 months, the U.S. Bureau of Labor Statistics said last week. In an effort to get small-businesses, the nation’s engine of job growth, to ramp up hiring, Obama proposed a 10 percent tax credit for small-businesses on any increase in wage expenses that are a result of either new wages or increased wages.
5. A smaller Small Business Administration budget. Obama’s budget would provide $810 million to fund the SBA, a $109 million, or 12 percent, decrease from the enacted level. Also, the budget provides $159 million for funding the disaster-loan program. The decrease in budget allowance is primarily due to an improving economy and lower default rates on government-backed loans.
6. No fees on the smallest SBA loans. The budget would allow the SBA to eliminate fees on loans for less than $150,000 made through the SBA’s flagship, 7(a) lending program. The goal is to facilitate lending to the smallest of small businesses, where the credit crunch is still preventing small business owners from getting access to the capital they need to run and grow.
7. Streamlined paperwork for SBA loans. Small-business owners have long complained that the SBA’s government’s loan programs, while helpful, require a burdensome amount of paperwork. As part of the SBA’s 2014 budget, $7 million would go toward a program called SBA ONE, which would use one set of application forms for all 7(a) loans. By making the loan application process more efficient, the goal is to attract more lenders to the SBA’s program, ultimately increasing access to capital for entrepreneurs.
8. Help refinancing your business mortgage. The President proposes reauthorizing the popular Section 504 Refinance program that has already helped 2,700 business owners refinance a total of $2.5 billion in loans. The program, which expired in Sept. 2012, helps small-business owners renegotiate their commercial loan debt, taking advantage of historically low mortgage rates. If reauthorized, the program could help as many as 10,000 business owners, the Obama administration predicts.
9. Mentorship on the business basics. The budget allows $40 million for a small-business leadership public-private partnership program which would train small-business owners in business basics including accounting and financing. Also, another $7 million would go specifically toward entrepreneurship education for veterans and $120 million would continue to support mentorship programs including the Women’s Business Centers, SCORE, and the SBA’s small-business development centers.
10. Extension of the SBA’s cluster program. The Obama administration budget would invest $5 million to support the Regional Innovation Cluster program. Under SBA Administrator Karen Mills’ tutelage, the SBA invested more than $1 million in each of 10 clusters nationwide as part of a pilot program to stimulate small-business growth. With the money, specialized, regional groups of businesses and academic institutions ban together to support, teach and build on one another.
11. Another 32 more SBA government-contracting officials. According to federal mandate, 23 percent of the money the federal government spends must go to small businesses. Historically, the government does not meet this quota. That’s because doing business with Uncle Sam, while profitable, is also a mystery to many small-business owners. To ensure that the federal government meets it, the budget includes $4 million for the SBA to use hiring 32 new officers to help identify small-business sources to Uncle Sam’s buying agents.
What are you most pleased to see in the President’s budget? What’s missing that you were looking for? Leave a note below and let us know.