With the 2012 presidential election looming, it’s important to understand just where President Barack Obama stands when it comes to small business.

Given that small businesses employ more than half of all Americans and account for 60 per cent of new jobs, the Obama administration is understandably interested in assuring business owners that they are of top priority.

The Startup America initiative

Start-ups have long been considered a strong driver of job growth. With that in mind, Obama is reviving the Startup America initiative that was first launched last year. Obama announced the revised legislative package earlier in the month and will cost $48 billion to fund. Its aim is to make it easier for small businesses/start-ups to raise capital for future growth.

Here’s a quick run-down:

  • Companies that increase employee wages or can show that they’ve created new jobs this fiscal year will be given a 10 per cent tax credit. Business owners can deduct $10,000 in start-up costs and can take advantage of 100 per cent depreciation on some equipment and software purchases.
  • Capital gains taxes will be permanently eliminated for all small business investments.
  • In hopes of attracting more skilled workers, country specific immigration caps will be done away with.
  • The Affordable Care Act will be amended to allow more businesses to qualify for tax credits to offset the rising costs of providing employees with health insurance.Top of Form
  • The Small Business Administration directorship has been elevated to a Cabinet level position.
  • Obama is also hoping to streamline the structure of certain government agencies in order to reduce the red tape that prevents start-ups from getting the financing they need to grow. In other words, smaller companies planning to launch an IPO won’t have to deal with as much red tape. Most importantly, the limit for ‘mini-public offerings’ has been raised from $5 million to $50 million.

Will it work?

Proposals to provide financial aid to start-ups have been kicking around Washington for years now and with little success. Another hurdle is finding a way out of partisanship. Over the past year Congress has been highly divided along partisan lines and much has been said about the unproductive bickering that goes with it. To that end, it is hoped that the new package will garner bipartisan support as it includes many ideas previously suggested by Republican policy makers.

While the President’s intention to reduce capital gains tax is a step in the right direction, many believe it doesn’t go far enough.  Senior tax policy analyst at the Heritage Foundation, Curtis Dubay, agrees that a lower capital gains rate will lead to the creation of more jobs. However, by limiting the policy to only small businesses, Obama is missing a great opportunity.

All in all Obama has proposed an exciting package that should have come a lot sooner. Its success will be determined by the administration’s ability to gain bipartisan support and bolder reforms to follow-up in the future.

With that in mind, making it easier to invest in start-ups is the crucial next step in seeing that small business in America continues to thrive.