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Source: Crain's New York Business
Subject: Workplace Justice
Type: Media Coverage

State of the Union disappoints entrepreneurs

Despite a State of the Union address that advocated support for “small businesses that are raising wages and creating good jobs” and for U.S. manufacturers that “keep jobs here,” President Barack Obama’s speech generally got low marks from local small business owners and experts, who complained it lacked specifics.

While welcoming his call for tax relief for job creators and the reduction of onerous regulations, they largely viewed last night’s address as a politically motivated speech. In particular, disappointment abounded over the president’s failure to address fully the tight credit that continues to plague small businesses.

“[The president] started on the right note by saying that access to credit for small business is a challenge, but didn’t say what he’s trying to do to resolve that issue,” said Rohit Arora, CEO of Biz2Credit, which provides online tools that match small businesses with commercial lenders.

Recently denied a loan for a building he wanted to buy for his 14-year-old business—even though he “owes no money to anyone” and never used his available line of credit”—Joe Delli Carpini, president of Cargo Tours International, a 10-employee freight-forwarding firm in Jamaica, Queens, said he had wanted to hear how the nation would “resolve the difficulties we have with banks following the financial crackdown.”

The president’s call for tax relief for small businesses that hire new workers or raise workers pay also failed to resonate. Richard Aviles, vice president of the three-unit Bridge Cleaners & Tailors, which has locations in Brooklyn and Manhattan and about 40 employees, described the president’s approach as “backwards.”

Mr. Obama “would lower taxes if businesses raised wages and created new jobs,” said Mr. Aviles, “but, at this point, we are still trying to recover from 2008 and it’s difficult to create new jobs with taxes, costs and wages going up.”

Edward Rogoff, the Lawrence N. Field Professor of Entrepreneurship at Baruch College, said the president’s interest in providing tax relief to small businesses has “marginal value,” noting that “most small businesses aren’t in an income tax-paying position,” because they aren’t profitable or their deductions offset their income.

Lewis Taub, a tax director and CPA at accounting firm McGladrey in Manhattan, expressed surprise at the president’s failure to address significant tax incentives that expired at the end of 2011, including a provision that allowed investors in small businesses to sell their stock without a tax on the gain, provided they held the stock for at least five years.

“It was an incentive to invest in small business,” he said.

What the small business community needed to hear—but didn’t—was the end to overzealous regulations, said Mike Durant, the director of the New York state chapter of the National Federation of Independent Business.

The government can “throw suitcases filled with money, but there’s still a hostile environment,” said Mr. Durant.

However, the president’s proposal to strengthen the nation’s manufacturing sector won points with Ecuadorian-born Leni Juca, owner of the three-year-old Oxium Copy and Print in Jackson Heights, Queens, and a member of Make the Road New York, a business and community improvement organization. The president advocated lower taxes for manufacturers that stay in the U.S., a measure that would be funded partly by a minimum tax on multinational companies.

Mr. Juca believes government support would allow his own two-employee firm to buy newer equipment that would provide greater production economies and allow him to compete against magazine and book printers in Central and South America.

“New equipment would get my per-unit costs down, increase my business and allow me to hire more people,” he said.

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