What Obama’s SOTU Proposals Mean for Business Owners
(This post originally appeared on Inc.)
So the State of the Union 2015 speech is over. Maybe you support the President. Maybe you don’t. But that’s not important. You’re a business owner. And you have people that rely on the decisions that you make. And because you’re a smart business owner, you don’t let your emotions get in the way of your decision making. So no matter what your opinion of the President is, you probably watched him speak or you read the analysis of the speech. And you are going to make sure to make plans–because you understand that some of the things he’s proposing will impact your company.
And what’s important to us, as business owners, is what impact this will have. To answer that question, I took a look at a few of his choice business-related proposals. Here’s the bottom line:
Taxes. Besides proposing various credits for the middle class (i.e. help for two-earner families, childcare assistance and increases in the earned income tax credit), the President wants to take more from the wealthy. Particularly, he wants to raise the tax on capital gains and dividends to 28% from its current 20% (it was 15% just a few years ago). He also want to change the way gains are determined for the purposes of calculating estate taxes.
The bottom line: Although the Republicans said the President’s tax proposals were a “non-starter,” be wary: some of this could very well happen. Why? Because both sides want to agree on some type of tax reform legislation during this session of Congress. There is already bi-partisan agreement on lowering corporate rates, closing loopholes in the code, ending “inversions” and even making certain corporate deductions, like the one for accelerated depreciation permanent. The Republicans want further reductions in personal rates and they may agree to increases in capital gains or the estate tax calculation as a compromise. Taxes are a business owner’s biggest bite, so pay close attention.
Sick Leave. The President wants all companies to provide a mandatory seven days of time off for when an employee gets sick. Reports say that more than 40% of companies don’t do this. Of course, employees love this–who wouldn’t like more time off, especially if it’s mandated by the government? Business owners are not happy about this idea as it’s a further infringement on how they manage their business, let alone the added costs. Many clients I speak to find it difficult enough determining when an employee is actually “sick” or just taking a mental health day.
The bottom line: No way. The President can do what he wants with the Federal workforce but Congress is not in a mindset to approve this legislation during this session any more than it is ready to approve an increase in the minimum wage.
Retirement Plans. The President wants to require nearly all employers to enroll their employees in a retirement plan and accept more part-time employees into their existing plans. His intentions are good. And most business owners I know recognize the benefits of employees putting away money so that they’re not in a position to beg for help when they retire. Also, note that the President is not requiring employers to contribute to these plans either so there’s no real financial hardship, other than the cost of setting up or administering. And he’s proposing tax cuts for employers who participate, but has offered no specifics yet. That’s all good except for one thing: it’s just yet another regulation from Washington. So naturally, business owners aren’t crazy about being forced to anything.
The bottom line: Unlikely to happen. The Republican majority in Congress has vowed to reduce regulations and red tape from DC and will make this one of the many examples of them living up to their promise.
Grants to fund cyber-security education. The President said the government will fund $25 million to historically black colleges to bolster training in cyber-security as the country needs to whatever necessary to protect its information security.
The bottom line: Already done. And good for him. The more people in this country trained to fend off the hackers, data-breachers and malware producers the better. As a recent victim of a ransom-ware program that nearly killed my business, I’m all in favor of the government doing whatever it can to fend these people off. And I know that my clients, particular the ones who have also been infected, would agree as well. Unfortunately $25 million is just a tiny drop in the bucket.
Easing trade restrictions with Cuba. The President already announced plans to open up trade with Cuba and is using his executive authority do so.
The bottom line: Done, and will happen without much Congressional interference. Public opinion seems to support the President’s move. This will certainly benefit companies that are interested in doing business with Cuban companies.
Infrastructure Funding. Just this past week the President announced programs with several Federal agencies to help private companies make capital investment in infrastructure projects. The programs include low interest loans and, in some cases, grants.
The bottom line: Done, and within his authority. This has received a big thumbs up from the business community. We all know that our country’s infrastructure is in need of serious refurbishment. But the business community is wary of pork projects. So the less spent by the taxpayer (Remember the 2009 stimulus?) that adds to our already bloated, $18 trillion national debt, the better. Programs like these that encourage the private sector to invest not only benefit those companies, but have a ripple effect among others in the construction industry who supply those beneficiaries.
Good speech? Bad speech? That’s irrelevant. And it’s not important what you think of the President either. What’s more important is what will actually impact your company. And based on the above, some of what the President discussed will impact you. That’s what you should be thinking about as you begin this new year.