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Eve Tahmincioglu

Primary author Eve Tahmincioglu has been covering small business and entrepreneurship for more than a decade. She regularly writes about small business issues for the New York Times and BusinessWeek's SmallBiz magazine. She also writes the Your Career column for MSNBC.com. She is the author of "From the Sandbox to the Corner Office."



The good news and bad news in Bush's budget

Posted: Tuesday, February 12, 2008 2:50 AM by Eve Tahmincioglu
Filed Under: , , ,

You can’t ever make everyone happy.

President Bush’s FY2009 budget appears to be a boon or disaster depending on the small business advocate you talk to.

“This President is turning his back on small businesses at the very moment our economy needs them most,” says Nydia Velázquez, chairwoman of Congress’ Committee on Small Business.

"We think it’s a substantial win for small business," says Bill Rys, tax counsel for the National Federation of Independent Businesses.

Funding cuts here. Tax breaks there.

It’s like a bad Ginsu knives commercial from the 1970s.

Velázquez is upset Bush is slicing and dicing the Small Business Administration’s funding by 15 percent and the agency’s programs that serves entrepreneurs like you.

Here are some problems she has point by point:

Increase fees for the 7(a) Program: This is the SBA’s primary loan program, providing loan guarantees to eligible small businesses unable to secure affordable financing from other sources.
Raises interest rates for the Micro loan Program: Micro loans are a crucial source of capital for entrepreneurs who don’t have strong credit histories. These loans have been particularly successful in helping women and minorities build businesses in their communities.
Cuts Funding for the Women’s Business Centers:  Despite a demonstrated need for this resource, funding is cut nearly 10%. The centers provide crucial counseling and development support for women entrepreneurs. This inadequate level of funding will prevent any new centers from opening.  
Cuts Funding for Small Business Development Centers: Even as he charges SBDCs with additional responsibilities, the President cuts their funding by 10%. These centers have a proven record of achievement and provide crucial technical assistance to entrepreneurs—especially with respect to weathering an economic downturn such as the one the nation is experiencing.

Rys, on the other hand, likes the increase of small business expensing for things like computers, office equipment and vehicles from $125,000 to $250,000.

“Small businesses can now reinvest back into their businesses,” he says.

The increase in expensing goes into affect this year so all you business owners should take advantage of it as soon as possible because it may not be around in 2009, he adds.

A one-year repeal of the estate tax and alternative minimum tax, or AMT, relief is also a plus in the budget, small business supporters contend.

“The lower rates are especially important to small businesses, since the majority of small businesses pay their taxes at the individual level,” says Michael Diegel, a spokesman for the NFIB. “Permanent relief from the estate tax means that family owned businesses will not have to pay this tax to pass their business on to future generations.”

Well, permanent relief of the estate tax may be a long shot, especially if a Democrat ends up taking over for Bush next year.

But as for the last Bush budget, what’s your take?

Here’s a link to some details.  Take out your Ginsu knife -- I know you have one -- and slice it up yourself.

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Comments

Hi, Eve.  An interesting article, but the claim that the proposed budget for 2009 represents a 15 percent cut from last year is highly misleading.  It's only a 15 percent cut if you articifically pump up the SBA's 2008 budget by including the $69 million in congressional earmarks.  Otherwise, it's very nearly the same as the current year, and significantly above the 2007 budget enacted by Congress.  Most important, it includes a healthy 6 percenet increase in the agency's operations budget.

Mike Stamler, Washington, D.C. (Sent Tuesday, February 12, 2008 3:02 PM)

8(a). I've never heard of 7(a). Ending the estate tax is a very important, this is not an asset that is being inherited, it is a business that supports the families of its employees. Estate taxes often destroy small businesses (businesses that pay taxes and provide jobs for the community). This is the opposite of economic development!

Nick, PA (Sent Tuesday, February 12, 2008 3:08 PM)

Not sure where you're getting your facts Nick.  In 2009, the exemption level for the estate tax will be $3.5 million for individuals, and $7 million for couples.  According to a recent Federal Reserve Survey of Small Business Finances, 96 percent of small businesses have a net worth less than the $3.5 million exemption rate.  This leaves only 4 percent of all small business qualified to pay the tax.

Furthermore, the true opposite of economic development is the passing down of huge fortunes from one generation to the next.  These massive inheritances often take the form of unrealized capital gains, and therefore would never be taxed at all if not for the estate tax.  The estate tax is the most progressive tax there is, it doesn’t destroy small business, it levels the playing field.

Perhaps the revenue generated from the estate tax could help patch up some of the real problems for small businesses presented by the Bush budget.

Andrew Sexton, MA (Sent Tuesday, February 19, 2008 1:54 AM)



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