New Small-Business Tax Proposal

On Monday, the White House announced several  small-business initiatives, including an extension of the permanent capital-gains tax relief for small company investors. The White House will also announce the creation of a new, private organization called Startup America, aimed at getting private companies to expand their support of entrepreneurship programs.

Small business owners have long proposed permanent tax breaks encouraging professional investors to fund promising start-ups. President Barack Obama is expected to introduce a 100% capital-gains tax break in his 2012 budget, and would extend a temporary measure originally introduced in September’s Small Business Jobs Act.

The White House tax proposal needing congressional approval eliminates capital gains taxes on investments held by certain small businesses for more than five years. This provision was part of a small business jobs act signed by Mr. Obama in September. The provision expires at the end of this year and the White House will ask Congress to make it permanent.

“Permanent tax reductions are certainly encouraging for first time investors”, said Achim Neumann, President of Neumann Associates, a New Jersey Business Brokerage firm. “Many of our first time buyers are searching for alternate ways to reduce the risk for their investments and minimize the risk/reward ratio.”

However, until the fine print of Mr. Obama’s proposal is made clear, many investors will not endorse the policy yet. Ultimately, the policy must be approved by Congress before becoming law. One concern is that a permanent capital-gains tax break doesn’t go far enough to trigger enough investments to jumpstart the economy. Thus, the SBA plans to host a series of roundtable discussions with entrepreneurs to find out which government burdens are most stifling to growing firms.

“Since SBA financing is a major source of funding for business purchases, an intensive dialog between the SBA and individual business owners can only help,” said Neumann.