President Barack Obama released his proposed federal budget for fiscal year 2015 on Tuesday. While the plan focuses more on stimulating the economy and reducing income inequality, it contains many proposals that would have indirect and direct effects on many small-business owners.
Congress seems unlikely to pass the President’s plan, especially in a midterm election year. Yet, it’s interesting to see how President Obama would like to allocate federal dollars. Here’s a look at how his proposal could affect small businesses if passed:
1. Increased consumer spending: Obama calls for spending $56 billion on what he calls the Opportunity, Growth and Security Initiative and $302 billion on a four-year transportation and transit construction project. These programs would pump more money into the U.S. economy and, in turn, put more spending money in consumers’ pockets. Many business owners that rely on consumer discretionary spending haven’t seen their business return to pre-recession levels.
2. More government contracting opportunities: Small construction- and transportation-related businesses could directly benefit from increased government spending in those areas, as could manufacturing startups taking advantage of Obama's vision of a nationwide network of manufacturing innovation hubs.
3. Less funding for the Small Business Administration: Obama is calling for $710 million for SBA funding in the upcoming fiscal year, $100 million less than what he requested for 2014, according to the Washington Post. However, the Obama administration contends that the SBA will need less funding because fewer businesses are defaulting on SBA-backed loans, so the SBA needs less money to cover those defaults. The SBA’s response to the President’s budget proposal is largely supportive.
4. Greater loan flexibility: Obama is proposing a waive on fees on 7(a) loans that are for less than $150,000, and small businesses would be able to continue refinancing commercial real estate loans through the 504 program.
5. Higher taxes on wealthy business owners: Obama proposed raising funds for his economic stimulus goals by reducing tax breaks for the wealthy, such as limiting the value of tax-advantaged retirement accounts. He also proposes lowering the corporate tax rate. However, most small businesses aren’t incorporated. That means many business owners would likely lose some valuable tax breaks under the President’s plan without benefitting from a lower tax rate.
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