Now that the 2008 election is over, small businesses around the country are wondering what the Obama effect will be on their business. While nobody knows exactly what will happen, some things do seem clear based on signals from the campaign.
It appears that Obama will be a mixed bag for the forest products industry. Obama was an original co-sponsor of the Lacey Amendment, which aimed to crack down on foreign lumber imports. However, he was also the favorite of most major preservationist groups in the general election. Without a doubt, Obama is expected to be less favorable to the forest products industry than President Bush. At the same time, Obama may take strong measures to help the housing market recover, which has been a major drain on lumber demand over the past year.
A lot will be learned by Obama’s appointments to major cabinet positions. President-elect Barack Obama favors renewable and clean energy sources over domestic drilling. He has called for an 80% reduction in greenhouse gas emissions by 2050 via a cap-and-trade system. Carbon credits may become a bigger deal for forest products companies.
Obama will require employers, excluding small businesses, to offer “meaningful” coverage or contribute a percentage of payroll toward costs of public health care plans for workers. He will likely offer a refundable tax credit up to 50% of the cost associated with new health care expenses. Obama has offered little on specifics as far as the costs and who qualifies as a small business. Obama also wants to eliminate capital gains taxes for small businesses and startups.
One key concern could be new rules for unions. Obama supports “Card Check” (non-secret ballot) for union elections, which many believe could lead to the development of unions in small firms and industries that previously had remained outside of the grasp of organized labor groups. While somewhat open to free trade agreements, Obama favors them only if they can spread improved labor and environmental standards around the world.
Another possible Obama reform would be a $500 tax credit to minimally reduce the double taxation on self-employed people who must pay both the employer and employee sides of the payroll tax. Wanting to keep money flowing to small businesses, Obama has supported an expansion of Small Business Administration (SBA) loan programs. With SBA loans down 30% this year, Obama wants to help entrepreneurs get loans, expand the network of lenders, and simplify the loan approval process.
In the election, Obama called for a two-year plan that would give a $3,000 tax credit to businesses for every new job created. But in reality this is barely enough money to cover the cost of acquiring and training new talent.
Obama also suggested tying the minimum wage to inflation, something which many businesses oppose.
The Hardwood Federation said the hardwood industry lost some longtime industry friends in the Senate, including John Sununu of
The National Federation of Independent Business (NFIB) has spoken out against a number of Obama’s policy suggestions. This includes raising taxes on higher income business owners and passing the Card Check provision.
President-elect Obama has already called for another economic stimulus package. This could encourage temporary consumer spending. However, it may not address the long-term problems that have gotten us into our current financial mess. Obama has proposed an additional $25 billion in federal funding for the construction and repair of roads, bridges, schools and other infrastructure. He also promised $25 billion to states to help them cope with the economic downturn without having to raise property taxes or cut vital services.
Obama’s plan will likely also extend unemployment insurance for long-term jobless workers who have exhausted their benefits, and temporarily suspend taxes on those benefits. He may temporarily allow penalty-free withdrawals of 15% from tax-preferred retirement accounts up to $10,000 while increasing home heating cost aid and encouraging federal agencies to use their existing authority to more aggressively modify the terms of mortgages.
While nobody knows for sure what exactly the future holds, one thing is for sure. Change is coming because our country has not faced challenges like this in a long time.
One meaningful benefit: Obama said he would temporarily extend a tax break allowing small businesses to write off up to $250,000 of investments. This would allow small business to immediately write off up to $250,000 in spending for new equipment and property through the end of 2009. The stimulus package enacted earlier this year provided for the $250,000 investment expensing limit only through the end of this year.
