Regardless of which Presidential candidate you support, there is a lot riding on this election for small business owners. With the economy still struggling to recover, which candidate is elected will impact your ability to successfully exit your small business, or, if you’re in the market, to potentially buy a small business. So whether you are a current or prospective small business owner, let’s take a quick look at how each candidate views the issues that are most important to the small business transaction market:
President Barack Obama: He has pushed legislation like the Small Business Jobs Act of 2010 to increase loans to small businesses. However, many small business owners, and aspiring small business owners, claim that this legislation has done little to help them grow or raise capital for a small business purchase. Obama also contends that his plan to increase taxes on those making over $250,000 will take some burden off of small business owners as the wealthy take a larger burden of taxes paid to the government. If you’re a small business owner in the lower tax brackets you may see similar tax policy and increased access to capital under a 2nd Obama term.
Governor Mitt Romney: Romney argues that an across the board tax cut will encourage economic growth overall and spur additional hiring and thus job creation for small businesses. He has also argued that uncertainty regarding 2013 tax rates is affecting business hiring decisions and that taxing the wealthy will hurt the very people who would be most likely to hire new employees.
Obama: His Affordable Care Act was signed in 2010 and starting in 2014 will require businesses with more than 50 employees to provide affordable healthcare coverage to full-time employees. This stipulation would remain the case if Obama is re-elected, likely resulting in higher health care costs for small business owners.
Romney: Would “repeal and replace” Obamacare, reverting to the system before the Affordable Care Act was passed. He would limit federal standards and requirements on employers, which may spur hiring and job growth, via reduced costs to employers. Romney has expressed that he would seek to enforce some of the more popular aspects of the law; including allowing children to remain on their parents’ healthcare plans until they turn 26.
The Fiscal Cliff
Obama: President Obama has stated that he will veto any Congressional attempt to extend the Bush era tax cuts from 2001 and 2003. However, Obama has said he is confident a deficit deal can be reached before the so-called fiscal cliff is reached. He has also stated categorically that he will not allow the broad spending cuts outlined in the Fiscal Cliff to be enacted. Whatever the solution, small businesses will be keeping a close eye on Obama’s agenda as failure to act to avoid the Fiscal Cliff would depress the overall economy, hurt cash flow and ultimately reduce the value of small businesses should owners be looking to sell in 2013.
Romney: Romney has asked that should he be elected, Obama and congress wait until after his inauguration to find a long-term fix. According to reports he has already been in talks with govt. officials to develop a plan for the fiscal cliff. He has said he is open to fixing the problems with a series of bills rather than one large one. Romney would not support the tax rate increase for those making over $250,000. Because Romney would not take office until after the initial Fiscal Cliff, small business owners looking to sell might have to hold tight for awhile in order to get their valuations back up.
Capital Gains Rates/Small Business Taxes
Obama: Has proposed extending the Bush-era capital gain tax cuts for households making less than $250,000 a year, an extension for 97% of small business owners. He has also proposed lowering the corporate tax rate to 28% from 25%. According to the Tax Policy Center, Obama favors increasing the capital gains tax rate five percentage points to 20 percent (from 15 percent currently) for tax payers “in the top two tax brackets.” Obama’s plan would mean that small business owners who sell their businesses in 2013 could pay 5% more in capital gains income tax.
Romney: The GOP contends taxing personal income above $250,000 would amount to a tax increase on the most successful small businesses. While he would not take office until after the New Year, he is in favor of extending the Bush-era tax cuts for all. He proposes lowering the corporate tax rate to 25% and a 20% across the board tax cut on all personal income. His running mate Paul Ryan’s budget calls for removing the capital gains tax completely. Extending the capital gains tax rate would mean owners looking to sell their business will be able to keep more of the final sale price.
Obama: Has expressed the need to continue to secure America’s borders and hold businesses accountable that break the law by undermining the American workforce and exploiting undocumented workers. Legislation would allow immigrants brought illegally to the U.S. as children to apply for work permits. This could increase the number of small business buyers on the market as a recent study by the Fiscal Policy Institute found that 18 percent of small business owners are immigrants, up from 12 percent in 1990.
Romney: Opposes amnesty programs and has called for self-deportation policies that would make it difficult for illegal immigrants to find work and assimilate with society. People would have the choice to go back to their country of origin or get in line legally to become a citizen of the country. Romney would, however, honor the Obama administration’s illegal immigrant work permits and not seek to deport them, helping boost the number of potential business buyers on the market.
Obama: Obama has been quiet on the subject but conventional wisdom says the payroll tax deduction that has been in place since 2012 would not be extended. Both parties are thought to be against the extension as it hurts the Social Security revenue stream. By raising the payroll tax, small business employers would also pay more, as the tax is split in two, with employer and employees paying an equal share, cutting into small business profitability.
Romney: Romney would likely also let the payroll tax deduction expire. His party has questions whether it was effective in stimulating the economy and also notes the negative implications for Social Security. This means Romney’s plan will also have small business employers paying a higher rate toward S.S. and lessen the amount small business owners can take home as profit.