Feb. 7, 2005 -- Small business issues played a central role in President Bush’s fifth State of the Union speech Wednesday night.

"To make our economy stronger and more competitive, America must reward, not punish, the efforts and dreams of entrepreneurs," President Bush said. He then proposed measures to reduce the number of class action lawsuits; pushed for Association Health Plans (AHP); and urged Congress to overhaul the tax code.

The president has repeatedly called for legal reforms, including limiting class action suits and asbestos claims. The topic may be of particular concern to small businesses, which the president noted pay $150,000 a year on average in litigation. The president singled out asbestos suits as among the most damaging.

In the past, President Bush has said he supports the Fairness in Asbestos Injury Resolution Act of 2004, written by Senator Orrin Hatch (R-UT). Under the act, defendant companies put money into a public fund that then resolves asbestos injury claims.

Asbestos has proved to be a bipartisan issue. Some democrats, like Senator Patrick Leahy of Vermont, support asbestos reform. "These bankruptcies create a lose-lose situation. Asbestos victims who deserve fair compensation do not receive it, and bankrupt companies can neither create new jobs nor invest in our economy," wrote Senator Leahy in November of 2003.

The second initiative the president put forth on Wednesday night was Association Health Plans for small businesses and their employees.

According to the Kaiser Commission on Medicaid and the Uninsured, the number of Americans below 65 years old without health insurance grew 5.1 million during the first three years of President Bush's first term. The study concluded the drop was due to continuing declines in employer-sponsored insurance.

Association Health Plans were introduced into the House on Wednesday under the Small Business Fairness Act. The president threw his weight behind them, asking Congress to include AHPs when drafting their "comprehensive health care agenda."

By allowing small firms to buy insurance as a group, the president hopes to improve the rate that small companies provide benefits. The National Federation of Restaurants, for example, could purchase insurance policies in bulk and then offer them to small, family owned restaurant. Along with enjoying economies of scale, AHPs will give smaller firms more plans to choose from and reduce administrative costs, said the National Center for Policy and Analysis.

In addition to alleviating the healthcare burden on small businesses, the president also proposed to further transform the tax code in ways they may find beneficial.

"Year after year, Americans are burdened by an archaic, incoherent federal tax code," President Bush said. President Bush added that he looked forward to working with Congress "to give this nation a tax code that is pro-growth, easy to understand and fair to all."

Atop the president's proposal is reducing the income tax rate. Under the current system, the highest earner's tax rate is 39.6 percent, while the lowest earner pays 15 percent. President Bush wants to reduce the rates to 33 percent and 10 percent, respectively. President Bush also wants to double the child tax credit to $1,000 per child, eliminate the estate tax, allow two-earner families to deduct up to 3,000 a year, and make the research and development tax credit permanent.

Jack Farris, president and CEO of the National Federation of Independent Business, lauded President Bush's tax policy, saying it would "allow small business to grow, create new jobs and boost our nation’s economic security instead of wasting precious dollars to plan for an uncertain future."

A different perspective comes from Max Sawicky, an economist at the Economic Policy Institute, who believes that the president's tax cuts are geared mainly to larger corporations. Also, if Social Security is privatized as proposed by the White House, many small companies that do not use computers will incur higher administrative costs as they file each employees payroll tax, Mr. Sawicky said.