We now face a make-or-break moment for the middle class and those trying to reach it. After decades of eroding middle-class security as those at the very top saw their incomes rise as never before and after a historic recession that plunged our economy into a crisis from which we are still fighting to recover, it is time to construct an economy that is built to last. The President’s 2013 Budget is built around the idea that our country does best when everyone gets a fair shot, does their fair share, and plays by the same rules. We must transform our economy from one focused on speculating, spending, and borrowing to one constructed on the solid foundation of educating, innovating, and building. That begins with putting the Nation on a path to living within our means – by cutting wasteful spending, asking all Americans to shoulder their fair share, and making tough choices on some things we cannot afford, while keeping the investments we need to grow the economy and create jobs. The Budget targets scarce federal resources to the areas critical to growing the economy and restoring middle-class security: education and skills for American workers, innovation and manufacturing, clean energy, and infrastructure. These are all areas critical to small businesses. The Budget is a blueprint for how we can rebuild and economy where hard work pays off and responsibility is rewarded.
Spur Job Creation by Enhancing Small Business Access to Credit. The Budget supports $16 billion in Small Business Administration (SBA) 7(a) loan guarantees, which will help small businesses operate and expand. This includes an estimated $14 billion in term loans and $2 billion in revolving lines of credit; the latter are expected to support $46 billion in total economic activity through draws and repayments over the life of the guarantee. The Administration also supports $6 billion in guaranteed SBA lending for commercial real estate development and heavy machinery purchases; $4 billion in Small Business Investment Company (SBIC) debentures to support new businesses and new jobs through early-stage and mezzanine small business financing; and $18 million in direct loans, for intermediaries to provide small loans to emerging entrepreneurs and other borrowers unable to receive credit elsewhere. In addition, the Department of the Treasury continues to implement key programs it established to provide capital to community banks and support to innovative state small business programs in order to spur additional lending.
Cut Taxes for Small Businesses Seeking to Grow and Expand: The President is proposing to build on the 17 small business tax cuts he has already signed into law with new tax cuts to encourage growth and investment, including expanding and making permanent the elimination of taxes on capital gains for key small business investments, providing a 10 percent income tax credit on new payroll for small businesses in 2012 (through either or increased wages), expanding and simplifying a tax credit for small businesses that provide health care to their workers and doubling the amount of start-up expenses entrepreneurs can deduct. The President is also proposing to extend 100-percent first year depreciation into 2012, giving firms an incentive for investing in plants and equipment now.
Boost Investment in Small Businesses. The Budget proposes to create incentives for capital investment in small businesses by permanently eliminating capital gains taxes on investments in small business stock, enhancing the availability of “patient capital” that small businesses need to innovate and grow.
Promote Impact Investment in Economically Distressed Regions, for Disadvantaged Groups, and in Sections of National Significance. In 2013, SBA will continue to leverage the SBIC debenture program to support impact investments in regions underserved by venture capital. The SBIC Impact Fund program, which operates with no cost to the taxpayers, annually guarantees up to $200 million in debentures that leverage efforts by venture capitalists, private equity firms, and institutional investors to invest in promising small businesses in underserved markets. Two other initiatives – the Small Loan Advantage and Community Advantage programs – increase the number of SBA 7(a) loans going to small businesses and entrepreneurs in underserved communities.
Help Innovative Small Businesses Obtain Early-Stage Financing. Within the SBIC debenture program, SBA will continue to expand the Innovation Fund, which addresses the capital gap many start-ups face between “angel investor” financing and later-stage venture capital financing. Up to $200 million in guaranteed debentures for matching funds will be available in 2013 to investors seeking to support innovative companies seeking to ramp up their operations and create new jobs.
Improve Small Businesses and Exporter Access to Federal Services. Businesses looking for assistance from the Federal Government should feel like they are interacting with one entity, rather than a number of separate, albeit linked, components. This means adopting a “No Wrong Door” policy that uses technology to quickly connect businesses to the services and information relevant to them, regardless of which agency’s website, call center, or office they go to for help. To this end, the Budget fully supports the BusinessUSA initiative, a one-stop resource that will make it easier for businesses to access the wide array of Federal small business and export promotion services available to them, while also further streamlining and coordinating Federal programs to reduce costs and provide customer oriented service.
Help Small Businesses Connect to Regional Innovation. Small businesses are key players in regional economies. The Administration includes $3.4 million for SBA to enhance small business participation in regional economic clusters that integrate economic, business and workforce assets to accelerate innovation and job creation. SBA will promote and support small business participation in regional economic clusters by awarding competitive grants to facilitate business counseling, training, and mentor-protégé partnerships in coordination with regional clusters. In addition, through the Department of Commerce’s Economic Development Administration (EDA) and other Federal agencies, the Administration will support regional cluster development, regional business plans, investment in science parks, and other activities authorized under the America COMPETES Act to promote innovation, regional competitiveness, and employment growth.
Strengthen Small Business Exports. The President, in 2009, set the goal of doubling American exports over five years. The October 2011 passage of the U.S.-Korea Free Trade Agreement opened up the market of the twelfth-largest economy to U.S. goods and services and supports thousands of jobs. The Budget proposes $517 million for the International Trade Administration (ITA) to continue implementation of the National Export Initiative, a broad Federal strategy to increase American exports and export-related jobs. With this funding, ITA will strengthen its efforts to promote exports from small businesses; help enforce international free trade agreements; fight to eliminate barriers to sales of U.S. products; and improve the competitiveness of U.S. firms. This funding will allow the Commercial Service to increase its export promotion efforts in key, growing markets abroad, as well as support the activities of SelectUSA, which helps state and local governments attract investment capital that creates jobs. ITA will play a key role in the interagency BusinessUSA initiative, a one-stop resource that will make it much easier for businesses to access the wide array of Federal export promotion services available to them. The Budget also supports the activities of the Export-Import Bank to strengthen its efforts to promote small business exports and to meet increased financing demands at no cost to the taxpayer. This will support billions of dollars in new exports and thousands of U.S. jobs.
Double the Small Employer Pension Plan Startup Credit. The Budget proposes to expand and improve employment-based retirement security by establishing automatic workplace pensions. Under current law, small employers (those that have no more than 100 employees) that adopt a new qualified retirement or SIMPLE plan are entitled to a temporary business tax credit equal to 50 percent of the employer’s expenses of establishing or administering the plan, including expenses of retirement-related employee education with respect to the plan. The credit is limited to a maximum of $500 per year for three years. The Administration proposes to double this tax credit to a maximum of $1,000 per year for three years (effective for taxable years beginning after December 31, 2013) and to extend it to four years (rather than three) for any employer that adopts a new qualified retirement or SIMPLE plan during the three years beginning when it first offers or first is required to offer an automatic IRA arrangement.
Help Small Businesses Provide Health Insurance to their Employees. The Affordable Care Act provided a new credit to help small businesses afford the cost of covering their employees. It is targeted for those with low- and moderate-income workers, and it is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. The Budget proposes to expand and simplify this credit. The credit would be expanded to employers with up to 50 full-time equivalent employees, and would provide a more gradual phase-out. The proposal would also reduce taxpayer complexity by eliminating certain requirements related to uniform contributions to premiums.