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Small-business outlook for Obama's 2nd term

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. The Associated Press
Monday, November 12, 2012 - 12:01 am

NEW YORK – President Obama's successful re-election to a second term is sinking in. No matter who small-business owners voted for, the election takes away some of the uncertainty that small-business owners have been carrying around. The question now is whether Obama can satisfy those who say he hasn't done enough to help them expand and create jobs.

So now that Obama has won four more years, what can small-business owners can expect from Obama on taxes, health care, the economy and regulation? The Associated Press interviewed small-business experts and advocates to find out.

Taxes

No president has a complete say over how much anyone, including small business owners, will pay in taxes. Expect the divided Congress to battle over Obama's request to raise the top tax rate on many business owners to 39.6 percent during 2013. That's the highest personal tax rate, and it affects some small businesses because their owners report their business taxes on their personal returns. Republicans in the House, many who were aligned with Republican nominee Mitt Romney, will oppose that tax increase, and the result may be a stalemate.

"I don't think anything's going to change," says Peter Cohan, a lecturer in entrepreneurial strategy at Babson College in Wellesley, Mass.

But Obama has made a point of proposing tax cuts that will benefit many small companies. He's calling for the corporate tax rate to drop to 28 percent from its current 35 percent. Manufacturers would pay no more than 25 percent. He's also backing more liberal tax deductions for small businesses that invest in new equipment.

"Congress will be more willing to work with the president on these small business-targeted tax policies," Arensmeyer says.

Recent history shows that Arensmeyer may be right. Earlier this year, there was bipartisan support in Congress for the Jumpstart Our Small Business Startups Act. It was designed to help small companies get financing more easily.

Health care

Obama's re-election means the health care overhaul will continue to be implemented, but small businesses still have to wait to find out how much it will eat into their profits.

Key provisions of the law go into effect in 2014, including the requirement that businesses with 50 or more employees provide affordable health insurance for their workers. What employers don't know yet is how much that insurance will cost. That won't be determined until states set up exchanges where individuals and companies can buy coverage.

Republican presidential candidate Mitt Romney promised to make changes to the law. Now that the overhaul has survived the re-election of Obama and a fight that advanced earlier this year to the U.S. Supreme Court, another big legal challenge is unlikely, says Risa Lavizzo-Mourey, president of the Robert Wood Johnson Foundation.

The economy and the federal budget

Obama may not be able to do much to get the economy growing much faster than it is now.

"I think both candidates were way overselling what they can do to create jobs and help the economy," says David Primo, an associate professor of political science and business administration at the University of Rochester in New York.

The federal deficit is part of the problem. Obama has to curtail spending – but federal government spending is equal to nearly a quarter of income produced by U.S. citizens. Cut government spending, including federal contracts, and small businesses lose revenue and may cut jobs. Many have put hiring plans on hold because of uncertainty about what's known as the fiscal cliff – the