Small Business Reaction to State of the Union Address

January 21, 2015

Jan. 20, 2015

Molly Brogan Day

Washington, D.C. – Tonight’s State of the Union Address from President Barack Obama held mixed implications for America’s small businesses. The National Small Business Association (NSBA) applauds the President’s efforts to expand global trade opportunities but is wary of tax reform proposals that  leave out the overwhelming majority of small firms.

“Corporate-only tax reform is a nonstarter for small business,” stated Todd McCracken, NSBA president and CEO. “Eighty-three percent of small businesses are pass-through entities and therefore not only will they NOT benefit from corporate-only tax reform, there is a chance they could lose some current deductions, resulting in a higher effective tax rate.”

On the positive side, NSBA was encouraged by Obama’s commitment to global trade, specifically the need for Congress to reauthorize the President’s Trade Promotion Authority.

The president talked about the importance of improving America’s cybersecurity and called for more clarity and stronger requirements on companies to notify customers in the event of a data breach. According to NSBA data, nearly half of small businesses have been the victim of a cyber-attack which cost small businesses on average $8,699 per attack, making greater clarity necessary.

Obama also called for a mandate on nearly all employers to provide some kind of retirement savings or IRA enrollment and allow part-time employees into their plans which could exacerbate the existing financial and paperwork burden retirement administration poses for small firms.

The president talked about taxes, calling for an increase in the capital gains tax top rate to 28 percent and proposed expanding the number of items subject to capital gains taxes by eliminating the “step up in basis” for inherited assets. These changes would mean that an inherited business could be subject to both capital gains taxes and estate taxes.

Obama outlined his commitment to working with the new Republican-led Congress; a welcome gesture to small-business owners who continually rank bipartisanship their top issue, followed closely by reducing the deficit and tax simplification – another key topic President Obama raised. That simplification shouldn’t end with the tax code, however: the need to ensure businesses operating in good faith aren’t ensnared by new and potentially complex overtime rules must also be a top priority.

“Despite positive economic gains, we still face some very serious problems, including our ever-rising debt,” said NSBA Chair Tim Reynolds, president of Tribute, Inc. in Hudson, Ohio. “Comments about reaching across the aisle must be more than empty gestures if we hope to gain any traction on these issues. Both sides should work on building important bridges across the aisle.”

Celebrating more than 75 years in operation, NSBA is a staunchly nonpartisan organization advocating on behalf of America’s entrepreneurs. NSBA’s 65,000 members represent every state and every industry in the U.S., and we are proud to be the nation’s first small-business advocacy organization. Please visit or @NSBAAdvocate.