Polls indicate President Obama is extending his lead in battleground states such as Florida, Ohio, and Pennsylvania, which is bad news for Republican challenger Mitt Romney. Since one of the former Massachusetts governor's strongest selling points is his successful career in business, he needs to score big on the economy against the President in the upcoming debates. Expect him to focus on jobs and business growth during the first debate on Wednesday.
According to a newly released USA Today/Gallup Poll, small business owners are split in their support: 47% to 47% with the rest undecided. That's about as tight as you can possibly get. Just one month ago, a poll by Manta showed Governor Romney leading the President among small business owners.
The President hopes to improve access to credit by supporting lending by small banks and Community Development Financial Institutions (CDFIs). His Financial Stability Plan seeks to provide lower-cost capital to small banks and CDFIs that lend to small businesses in struggling rural and urban areas.
The President also supports legislation to increase the maximum size of SBA loans. He would like to raise the ceiling for the popular SBA 7(a) loans from $2 million to $5 million to help small businesses invest in machinery, equipment, land, and buildings. He also wants to increase the maximum loan size of 504 loans to $5.5 million to help small businesses grow by supporting real estate purchases, and to raise the size of SBA microloans from $35,000 to $50,000.
The SBA has been an incredibly effective program in enabling small business owners to grow their companies. While Mr. Obama did not set up the agency -- it was established by President Eisenhower in the 1950s -- its impact is significant, and an advantage of incumbency is being able to take credit for what happens on your watch. The SBA lending has risen to record levels during the past four years.
Mr. Obama has worked closely with economic experts, including Federal Reserve Chairman Ben Bernanke, Treasury Secretary Geithner, and SBA Administrator Karen Mills to find ways to stimulate small business growth. During the summer, I met with the President's Council of Economic Advisors to discuss ways to increase the flow of capital to small businesses. I know first-hand that this is a top priority.
Lastly, President Obama says he plans tax cuts for small businesses to help them grow and to put people back to work. The President’s plan will cut in half the taxes paid by businesses on their first $5 million in payroll, targeting the benefit to the 98 percent of firms that have payroll below that amount. He also proposes tax credits of $4,000 to firms that hire long-term unemployed workers and credits of up to $9,600 for hiring unemployed veterans.
The President's overall tax plan trumpets “The Buffet Rule,” in which Americans that make more than $1 million would pay at least the same rate as middle-class families. However, Mr. Obama has said he wants to tax "the rich", defined as those who make more than $250,000 a year. Small business owners in high cost areas such as New York, Boston, Los Angeles and San Francisco might not consider themselves among the "rich." Further, many small business owners are a bit concerned with the loss of the full deduction of employee healthcare costs under the Affordable Care Act ("Obamacare") once a company hires its 26th employee.
Mitt Romney is offering a detailed "Five Point Plan for a Stronger Middle Class" that aims to create more jobs and greater income. Stimulating job growth and entrepreneurship is a primary theme of his campaign, and much of the focus is geared towards improving small businesses. The Republican plans to accomplish these goals by reducing taxes on job creation through individual and corporate tax reform and replacing Obamacare with healthcare reform that controls costs.
With regard to individual tax policies, Mr. Romney proposes a permanent 20% cut in marginal rates and elimination of the estate taxes. He also maintains that the current 35% U.S. corporate tax rate is among the highest in the world and limits businesses from investing and creating jobs. Mr. Romney wants to cut the corporate rate to 25%. The Republican also wants to strengthen and make permanent the Research and Development tax credit that he believes helps startups, because they can offset taxes on future profits. This tax credit is for businesses to hire more employees, especially those who specialize in R&D. Lastly, Romney wants to switch to a territorial tax system in which businesses will only be taxed on domestic income, thus decreasing corporate taxes, especially for those who do business internationally.
Another priority for Romney is ensuring American workers possess adequate education and skills to succeed in the jobs of today’s global economy. His plan is to better prepare American workers for success by creating personal reemployment accounts. Unemployed workers would have control over an account to be used towards retraining. Individuals could use the funds to enroll in a local community college or pursue vocational training.
Further, Romney wants to encourage greater private sector involvement by establishing retraining funds that would provide private companies incentives to hire and train new workers. To ensure a mutually beneficial partnership, companies would only earn the funds by retraining and keeping an individual for a given period of time. Romney believes that while programs offering incentives for private-sector participation already exist, their potential hasn’t been reached.
Perhaps the biggest difference between MittRomney and the President is the challenger's opposition to Obamacare, which a number of small business owners view as an additional tax. Most small business owners worry about the economy and ever-increasing fuel prices. Tax policy and health-care policy seem to rank further down the list of their concerns. This seems to be a growing advantage for the President.
This opinion column was written by Rohit Arora, co-founder and CEO of Biz2Credit, an online resource that connects small business owners with 1,100+ lenders, credit rating agencies, and service providers such as CPAs and attorneys via its Internet platform. Since 2007, Biz2Credit has secured more than $600 million in funding for thousands of small businesses across the U.S.