Obama offers aid package to small business

Will President Obama's proposals to help small businesses get them out of their rut?

Mark Wilson/Pool/Sipa Press
President Obama speaks about job creation and economic growth at the Brookings Institution Tuesday. Mr. Obama proposed a number of measures to help American small businesses.

President Obama's move to eliminate capital gains taxes, extend write-offs, and create employment incentives for small businesses is a boost to a segment of the economy still reeling from the downturn.

But with few details outlined by the president, any real federal help for small businesses remains tentative and is probably months away.

"How soon Congress will be able to consider new stimulus measures is really hard to say, but we would not expect a bill to be proposed until January or February of the New Year," writes Briane Bethune, an economist at IHS Global Insight in Lexington, Mass., in an analysis.

No one denies that small business is in trouble.

Responsible for most of the job gains in the last two decades, small businesses now are laying off more workers than either mid-sized or large businesses — the first time that's happened in records covering the last nine years. Small companies have also struggled to get loans.

No wonder that after a big increase earlier this year, small business sentiment fell again in November for the fourth month in a row, according to a survey released Tuesday by the National Federation of Independent Business.

Compared with that scenario, the outlook for big business appears downright rosy. Two-thirds of CEOs at leading corporations expect their company's sales to increase next quarter, the Business Roundtable reported in its latest survey, released Tuesday.

To help small businesses, the president is borrowing a page from the Bush administration. He's proposing tax cuts — specifically, the temporary elimination of capital gains taxes on small firms and the extension of write-offs for their losses for 2010.

Mr. Obama also wants to create a new tax incentive "to encourage small businesses to add and keep employees and I’m going to work with Congress to pass one," he said in a speech Tuesday at the Brookings Institution. He also is proposing to eliminate fees and increase guarantees for loans backed by the federal Small Business Administration.

Will these efforts help?

There's wide disagreement between liberals and conservatives about whether eliminating the tax on capital gains creates jobs.

"It may not be a bad idea but a likely poor way to achieve the objective" of creating new jobs, writes Zhonglan Dai, an accounting professor at the University of Texas at Dallas, in an e-mail. "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."


— And don't forget to find us on Twitter @CSMecon.

You've read  of  free articles. Subscribe to continue.
QR Code to Obama offers aid package to small business
Read this article in
QR Code to Subscription page
Start your subscription today