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Obama Proposes Aid To Small Businesses

Compiled By CityTownInfo.com Staff
December 9, 2009

President Obama yesterday called for several measures to assist small businesses in an effort to spur job growth.

Obama, noting that small businesses create 65 percent of new jobs, outlined several incentives aimed at small businesses: He proposed eliminating the capital gains tax on small business investments for a year and cutting employment taxes to encourage small business hiring. In addition, Obama proposed eliminating fees and increasing loan guarantees for Small Business Administration programs.

"I believe it's worthwhile to create a tax incentive to encourage small businesses to add and keep employees, and I'm going to work with Congress to pass one," Obama said in a speech Tuesday at the Brookings Institution, a research organization in Washington, D.C.

The president also called for extending provisions in the stimulus legislation passed earlier this year, including enhanced expense allowances and an accelerated depreciation tax incentive.

Yet some of the proposals are controversial. The Christian Science Monitor reports, for example, that there is wide disagreement about whether eliminating the tax on capital gains will ultimately create jobs.

"It may not be a bad idea but a likely poor way to achieve the objective [to create new jobs]," noted Zhonglan Dai, an accounting professor at the University of Texas at Dallas, who was quoted by the Monitor. "Most of the small businesses are not likely to be public firms and the potential benefit from the lower cost of capital does not get to them."

Critics also pointed out that cutting employment taxes would not necessarily boost hiring. Cap Willey, managing director at accounting and consulting firm CBIZ Tofias and a past chairman of the National Small Business Association, told USA Today that a tax cut would not necessarily result in new jobs.

"It won't be the motivating factor," he was quoted as saying in USA Today. "We won't hire just for the sake of the tax credit."

In addition, Harry Holzer, an economist at Georgetown University and the Urban Institute, noted in USA Today that while small businesses have had difficulty raising capital, eliminating fees and increasing loan limits through the Small Business Administration would not necessarily mean increased hiring.

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