Well, I am back to discuss the third of a four part series on the Obama Policy Agenda Proposals that I began last week. If you missed the former posts, you can find them here:

Obama Policy Agenda Proposals Part I
Obama Policy Agenda Proposals Part II

And now, Part III:

American Jobs Tax Credit. This proposal would create a new temporary tax credit that would be available in 2009 and 2010. Existing businesses would receive a $3,000 refundable tax credit for each new full-time employee that they hire in the United States. This is one that actually sounds promising. I am undecided on the refundable portion of the credit, since I am not a big fan of refundable tax credits. At least in this instance, the funds are going to a job creator instead someone who is doing little with the money to help drive economic growth.

Extension of Unemployment Benefits and temporary suspension of taxes on these benefits. Ultimately, somone will have to pay for this (aka taxpayers.) As far as the suspension of taxes on these benefits – why is now any different than 5 years ago? In both situations, you have someone out of a job that is down on their luck. Why now do we propose that these benefits should not be taxable, yet 5 years ago the same people wanted to tax them. Why is it different now?

Automatic pension plan enrollment. Under this proposal, employers would automatically enroll employees in workplace pension plans unless the employee opted out. If an employer does not already hav a plan, it would be required to enroll employees in a direct-deposit IRA account compatible with existing direct deposit payroll systems. I agree and disagree with this one. First of all, EVERYONE should be participating in a retirement plan. I just am not sure that the government should mandate it. I would not mind it if they would funnel all of the Social Security withholding in there and let the employees and their advisors decide how to invest it – instead of the government. This can definately turn into a burden for small businesses. We will have to wait and see the rules surrounding this one if it passes. Can you, as a small business owner, imagine wearing one more hat?

Penalty-free hardship withdrawals from IRAs and 401(k) plans. This would allow people to withdraw up to 15% (a maximum of $10,000) of the funds from their retirement accounts without paying a penalty in 2008 (retroactively) and in 2009. Not a bad idea, but not a great one either. It is always a terrible idea to sacrifice your retirement funds (most of which are protected from a legal perspective) for current day needs. It will help some people get over the hump though. Unfortunately, most of them will not be as dilligent about building the funds back up as they were in jumping on the band wagon to pull them out.

Retirement Savings Incentives. Personally, I find it sad that in America we have to be incentivized to plan for our futures. Shouldn’t this be something that responsible people just do?
While I think it is ridiculous that we have to do this, I beleive that we have seen evidence over the past 100 years that proves that the majority of Americans will do little or nothing to plan for their retirement. So, go for it. At least we are rewarding responsibile savings instead of giving the $1,000 away to be spent on junk.

Increase Immigration Quotas. Supposedly, this Obama proposal is going to increase the number of “legal” immigrants in order to meet the demand for jobs. I am confused about this one. Isn’t President Obama always on TV saying that we need to create jobs, and we are losing jobs, and there are many Americans without jobs? Perhaps I am reading this wrong, but wouldn’t these new “legal” immigrants be competing with the Americans that are without jobs for the jobs?

Remove Incentives to Enter the United States Illegally. This Obama proposal is supposed to relate around a crack down on employers that hire illegal aliens. There were significant law changes within the past couple of years that will help on this front. I am not sure what else Obama has up his sleeve on this one. This sort of conflicts with the last proposal. Is the plan to crack down on Illegal immigration simple to make the illegal immigration legal? This way, they could say they solved two problems at once – although, not really.

If you have read all of this, congratulations! The good news is that Part IV only has one proposal in it. The bad news is that it may be the one that destroys your small business – as it has the potential to do to millions nationwide. Stay turned for Part IV…

Yesterday, I started a series of post regarding President Obama’s Policy Proposals – this is Part II of that post. If you missed Part I, you can find it here.

Family and Medical Leave Act Expansion. Obama’s proposal wants to expand FMLA to require businesses with as few as 25 employees to abide by its requirements. Currently, the requirement is only for companies with 50 or more employees. President Obama’s proposal also hopes to expand the list of reasons employees can give in order to take the leave, including the following: up to 24 hours per year for participation in children’s academic activities, leave for workers who care for individuals who live in their home for 6 months or more, and leave for employees to address elder care, domestic violence, and sexual assault. When FMLA originally passed in 1993, it placed a lot of requirements on many small businesses that simply could not be easily met in such a small enterprise. Now they are trying to force it on small businesses with as little as 25 employees. This will result in higher cost and lower productivity for many small businesses.

Extend Paid Sick Time Benefits. President Obama has proposed a requirement that employers provide seven paid sick days per year. In the material that I have read, there is no distinction that states that some employers will be required to do this and other will not. Nevertheless, if small businesses are required to abide by this requirement, it will certainly result in higher labor cost for most. When I worked in a big corporate job, we didn’t even get seven sick days (we got 5). This should be a benefit that is decided by the employer. It is part of the employee-employer agreement when the employee starts and if the employee does not like the employer’s policy – they should go find a job elsewhere. In my opinion, government has no reason to be interfering here.

Encourage State to Adopt Paid Leave. I did a little research trying to figure out what this was, and the best I can figure it is another social program. If you have to take off from your job for certain reasons, presumably sickness or another FMLA allowable excuse, you can still get paid. President Obama’s proposal hopes to get all 50 states on board and President Obama has said that he will sit aside $1.5 billion to help States with startup cost, etc. Do I need to say a lot here? Have we ever implemented any social program where the cost did not astronomically exceed the planned cost? Have we ever implemented any social program where it was not throughly abused?

Small Business Health Tax Credit. President Obama is proposing a new tax credit to help small businesses provide affordable health insurance to their employees. Sounds good, but who is really paying for this? Someone is paying for it.

National Health Insurance Exchange. I don’t quite understand this one. This proposal is to establish an “exchange with a range of private insurance options as well as new public plan based on benefits available to Congress that will allow individuals and small businesses to buy affordable health coverage.” One thing I know is that insurance ultimately cost what the underlying medical cost are plus a small profit for the insurance company. This small profit looks big when added up on all the policies, but eliminating the profit on an individual premium is not going to have a drastic effect on the bottomline price. The underlying expected medical cost will ultimately determine the cost of the insurance. I am not a fan of insurance companies, but lets be fair – just like any other company they are in business to make a profit. They are not going to take a loss because they like Obama and because he asks nicely. In order to lower the cost of insurance, someone has to pay for it. Also, I doubt that insurance similar to what “Congress” has will ever be affordable.

Coverage of Catastrophic Health Costs. President Obama’s proposal here states that it would “cover a portion of the catastrophic health costs businesses pay in return for lower premiums for employees.” I am not quite sure what this means, but I understand this as the government will kick in towards the cost of catatrophic insurance as long as the savings is passed on to employees. Sounds good on the surface, but once again who is paying for this? The government just doesn’t have a lot of excess money sitting around. They will have to get the money for this from somewhere which basically means higher taxes.

Large Employer Health Care Mandate. This would require large employers that do not offer coverage or make a meaningful contribution to the cost of health coverage for their employees to contribute a percentage of payroll toward the cost of their employees’ health care. Most large employers already offer some sort of coverage to full-time employees. Many that do not are in industries that are already struggling to get by from a cost standpoint. In other words, large employers that do not provide health coverage do so for a reason – it is not affordable to do so within their business model. Too many people have this view of business and especially large companies that they are greedy and are keeping more than their fair share. Many of these companies are barely making a profit and are barely getting by. Increased cost and regulations are not what they need to make it through this difficult economic time. Hopefully, this will not result in more of our jobs disappearing to overseas manufacturers who do not have these strangleholds on their livelyhoods.

I will post Part III of this multiple item post tomorrow. As always, if you have any questions, feel free to ask.

Now that President Obama is officially in office, we want to keep you up to date on the changes that may be coming your way. Keep in mind that none of the below changes have become law yet and must be voted on by Congress. Details are not yet available; however, it is clear that if some of these items are enacted into law they will have a substantial impact on small business owners. Due to the large amount of these Policy Agenda Proposals, I will discuss them over several posts.

Increase the minimum wage: President Obama has proposed to raise the minimum wage to $9.50 per hour by 2011 and index it to inflation. I have never been a fan of the minimum wage. I think people should get paid what they are worth, not some arbitrary amount set by government. This will certainly result in an increase in cost to many businesses throughout the Country. I can only hope that it does not result in an increased number of jobs being shipped overseas where such requirements do not exist.

Making Work Pay tax cut: The details on this are very unclear. Supposedly, it would permanently cut taxes by $500 per person ($1,000 per family). I will keep you posted on this as I hear more details.

Tax cut for senior citizens: Eliminate all income taxation of seniors making less than $50,000.

Reverse certain Bush tax cuts. This proposal would reverse most of the tax cuts for the highest producing tax payers. The Obama proposal mentions the “wealthiest” taxpayers. Unfortunately, the policy makers do not understand that “wealthy” and “high income” are two totally separate things and that having a “high income” does not translate into having more cash for taxes. This will definitely have an adverse effect on many small businesses throughout the nation.

Welfare Credit Expansion. Apparantly “Change” does not mean that the government is going to stop telling the American people the truth. I wrote about this a few weeks ago, asking for then President-Elect Obama to come clean on this lie that the government has been dealing to the American people since 1975. Instead of coming clean and fixing the issue, President Obama has propose to expand the Earned Income Tax Credit (EITC, otherwise known as the Welfare Credit) so that full-time workers making minimum wage would get a benefit of more than three times what they can currently claim. Currently, the maximum benefit is $4,825. So, does this mean that they can get an additional $14,475 handed to them for doing nothing other than filing a tax return. Given the above request to increase minimum wage to $9.50, a full time employee eligible for this credit would earn $19,760 in wage, pay no income tax, and recieve a “refund” for more than $14,475 resulting in a total of $34,235. In addition, President Obama’s proposal calls for this benefit to be doubled if they are paying child support and it would also reduce the Welfare Credit (EITC) marriage penalty. As I stated in my prior post, I am not debating for or against welfare. I am simply debating against lieing to the American people about it.

This topic always gets me riled up, so I am going to stop now. I need to go blow off some steam. I will post some more on the upcoming policy agenda tomorrow – some of it good, some of it bad. In the meantime, if you have any questions about how these proposed changes may effect you – you know where to find us.

Large gas tax hikes may be on the horizon – especially if gas prices stay as low as they have been over the last several months. Democrats are staring at a $1.2 trillion budget deficit and need to money somewhere to attempt to reduce the deficit.

The National Commission on Surface Transportation Infrastructure Financing is proposing that Congress raise the gas tax an additional 10 cents a gallon and the diesel-fuel tax 12 to 15 cents a gallon. This translated into tax increases in excess of 50% of the current amounts paid. Currently, Federal gas and diesel taxes are 18.4 and 24.4 cents per gallon, respectively. All of these taxes are on top of the taxes levied by individual states which range from 8 cents (Idaho) to 36 cents (Washington). Rates for North Carolina and South Carolina are 30.15 cents and 16 cents, respectively. Click here for more Motor Fuel Excise Tax Rates.

In addition, the commission is pushing to tie the rate increases to inflation so that they will automatically increase instead of having to be voted on and approved.

Opponents of the gas tax argue that it unfairly taxes lower income families – since virtually everyone buys gas. My guess is that many of these families have incomes lower than the $250,000 threshold in which President-Elect Obama promised no tax increase. Of course, his argument will be that he was talking about income taxes. Bottom line, a tax increase is a tax increase and they will raise the money anyway they can. They have to pay for all of these bailouts and new government programs somehow.