Three proposals in President Obama’s $3.5 trillion 2013 budget may have tremendous impact on small businesses if implemented. Broadly, the budget contains initiatives to help communities better prepare entrepreneurs to “grow their businesses and thrive in the global economy.” It seeks to further assist communities by helping local colleges to become “career centers” that teach high-technology business skills needed to compete in business today.
The three specific small-business proposals are a $200 million Innovation Fund, $30 billion to support community bank lending, and a doubling of the pension plan start-up tax credit to a maximum of $1,000 per year. Innovation appears in several provisions of the budget, making it the buzz on the Office of Management and Budget’s Website.
Under the Innovation Fund, up to $200 million in guaranteed debentures for matching funds will be made available to investors wishing to support innovative companies in ramping up their operations and create jobs, the White House says. Small businesses can increase the impact of this and other debenture programs of the Small Business Investment Company by linking into regional innovation initiatives, such as the $3.4 million SBA effort to enhance small business regional economic clusters.
The budget also proposes to support community colleges with an $8 billion program to train and place students in high-growth and technology fields. Students with an eye on entrepreneurship can take advantage of the program to acquire innovative skills needed for tomorrow.
To help small-business owners negotiate red tape for start-up funding, the budget provides for a $30 billion fund that targets lending to small businesses through community banks. This fund was approved in the 2011 Small Business Jobs Act and, according to a White House fact sheet, is designed to incentivize community banks to offer more small business loans. Community banks account for more than 50 percent of such loans. Although the funds are part of the Troubled Asset Relief Program or TARP, the budget proposal will move them to the banks via legislation, thereby eliminating TARP red tape.
Small-business advocates are generally positive about the initiatives offered in the budget. However, the tax implications of a number of proposals should not be discounted. Small-businesses owners may be hit with higher taxes if their income is more than $250,000 and they report that income as an individual.
Since this budget will have to go through Congress, a highly charged debate over the big proposals can be expected. Still, many of the small-business initiatives may survive intact because they are not much different from incentives and programs currently being offered.