President Releases 2015 Budget ProposalMarch 5, 2014
President Barack Obama on Tuesday, March 4 released his proposed budget for FY 2015 which calls for $56 billion in new stimulus spending above the discretionary budget cap in place for next year, and continues spending through 2021 at $370 billion. It offsets some of that increased spending through cuts in 2022 through 2024. The budget projects $1.8 trillion in increased tax revenue over the next 10 years, and projects that by 2024, the deficit would be 1.6 percent of the economy, an improvement over the 1.7 percent deficit projected for 2023 in his last blueprint. The gross federal debt would rise to $25 trillion in 2024 under the budget, however, up from $17.9 trillion in 2014.
The President laid out a framework for business tax reform that contains the following five elements: 1) eliminate loopholes and subsides, broaden the base and cut the corporate tax rate; 2) strengthen American manufacturing and innovation; 3) strengthen the international tax system; 4) simplify and cut taxes for small businesses; and 5) restore fiscal responsibility and not add a dime to the deficit.
Some highlights for small businesses within the budget proposal include:
- With a total request of $710 million, the U.S. Small Business Administration’s (SBA) budget seeks to enhance small business access to capital, boost federal contracting opportunities and disaster relief assistance, and promote entrepreneurial development for more than 28 million businesses that are the backbone of the American economy.
- With respect to credit programs, the FY15 budget requests $45 million of the 504 program, $4 billion for the SBIC Debenture Program and $5 billion for SBA’s growth accelerator initiative as well as a reduction of approximately $64 million in business loan subsidies and no subsidy for the SBA’s 504 Refi program which expired at the end of FY12.
- The FY15 budget also requests a total of $197.8 million for non-credit programs such as Regional Innovation Centers, SBDCs and the HUBZone program, among several others. Additionally, the President’s budget requests a total of $8.5 million for the SBA’s Office of Advocacy.
- The budget request includes $497 million for the International Trade and Investment Administration, an eight percent increase over 2014 enacted levels. The administration proposed $15 million to speed up operation for the Interagency Trade Enforcement Center, which probes alleged unfair trade practices, and $20 million to support the SelectUSA program that recruits businesses for domestic investment to create jobs. The Bureau of Industry and Security would receive an increase of about 9 percent from its fiscal 2014 enacted level, to $111 million to sustain export licensing and enforcement.
- Various tax provisions that impact small business, including:
- Permanency for the Research and Experimentation (R&E) tax credit for expenditures paid or incurred after Dec. 31, 2013, and increase the rate of the alternative simplified research credit (ASC) from 14 percent to 17 percent, effective for expenditures paid or incurred after Dec. 31, 2014.
- Permanently extend the Work Opportunity Tax Credit (WOTC) to apply to wages paid to qualified individuals who begin work for the employer after Dec. 31, 2013.
- Permanently extend the 2013 section 179 expensing and investment limitations. The deduction limit of $500,000 and the $2 million level for beginning the phase-out would be indexed for inflation for all taxable years beginning after 2013, as would the dollar limitation on the expensing of sport utility vehicles. Qualifying property would permanently include off-the-shelf computer software, but would not include real property.
- Make permanent the 100-percent exclusion for qualified small business stock.
- Permanently allow up to $20,000 of new business expenditures to be deducted in the taxable year in which a trade or business begins and to amortize the remaining amount ratably over the 180-month period beginning with the month in which the business begins. This maximum amount of expensed new business expenditures would be reduced (but not below zero) by the amount by which new business expenditures with respect to the business exceed $120,000.
- Beginning in 2018, make permanent the estate, generation skipping-transfer (GST), and gift tax parameters as they applied during 2009. The top tax rate would be 45 percent and the exclusion amount would be $3.5 million for estate and GST taxes, and $1 million for gift taxes. There would be no indexing for inflation.
- The plan would also tax “carried interest” — a favorable treatment of income earned through partnerships — at ordinary wage levels, culling 13.8 billion in new revenue through fiscal year 2024.
Please click here to view a more detailed budget summary from the Committee for a Responsible Federal Budget.