by Ben Humphrey, Anjana Sundaram and Malathi Nayak,
Jan 28, 2010
The new tax break proposed by President Obama in Wednesday’s State of the Union address has garnered a mixed reaction from Chicago small business owners. Many interviewed in an informal survey were enthusiastic about its potential benefits, but some expressed uncertainty in the absence of any details on how the program will work.
“From my perspective the biggest thing is payroll,” said Lisa Farrell, owner of Highland Park boutique Ooh La La. “The [tax] credit would really help with that.”
President Obama’s new tax credit would apply to more than one million small businesses that boost hiring or increase wages. Although a broad outline of the tax credit was proposed by Obama in his speech, the White House has not set a specific date to release details.
Jonathan Swain, a Washington, D.C.-based spokesman for the U.S. Small Business Administration said Thursday, “We want to build on the success of last year’s [American Recovery and Reinvestment Act]. In the next two weeks we’ll learn more about it all.”
Meanwhile, many business owners are unsure of who will qualify for the tax break or how it will be structured.
And, regardless of Obama’s tax credit proposal, a number of business owners don’t plan to hire workers or raise wages until other priorities are addressed. “First, I need capital to grow my business,” said Matthew Holowinski, 40, owner of Greenberg Rent A Car, located on Chicago’s Northwest Side. “I need to purchase cars so I can make more revenue…from the revenue I can hire more people.”
Some companies are still reeling from the economic downturn and are simply unable to add headcount in order to qualify for the credit.
“Currently, my business is treading water,” said Byron Collins, owner of BDC Capital Enterprises LLC, located in north suburban Schaumburg. “It’s tough keeping the doors open everyday, so I can’t see that as any kind of incentive. Any tax break I received would be offset by what I’d spend hiring someone.”
Obama’s plan would also expand small business loans by community banks using $30 billion of repaid Wall Street bailout money. It would eliminate capital gains taxes on small business investments and extend an expense policy allowing businesses to expense or immediately deduct initial investments in machinery or equipment. The Stimulus Act of 2008 raised the program’s expensing limit to $250,000 from $100,000, but this extension expired at the end of last year.
Despite the current ambiguity surrounding the program’s details, business owners like Holowinski said they are hoping for the best. “I am really counting on it. I hope it will go through, and we will be able to obtain the credit and move forward.”