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CQ Roll Call: SBA: GOP Favors Spending Cuts But Frets Over Tax Impacts

Washington D.C., Apr 11 -

CQ Roll Call: SBA: GOP Favors Spending Cuts But Frets Over Tax Impacts
By Emily Holden
April 11, 2013

Fiscal conservatives are pleased that the president’s budget would trim spending on the Small Business Administration by nearly 12 percent, but Republicans say the proposal’s overall tax policy could counteract the SBA’s efforts.

Obama’s fiscal 2014 request includes more than $1 trillion in revenue raisers over a decade, including $580 billion in tax hikes on the wealthy and a $3 million cap on tax-exempt individual retirement accounts. The plan also calls for a one-time 10 percent tax credit for small businesses that hire new workers.

House Small Business Chairman Sam Graves, R-Mo., called small businesses “the engine of job creation” and said they “cannot operate and plan ahead under this type of fiscal stewardship,” a common sentiment among Republicans, who want to scale back the size and scope of federal government.

Graves argued Wednesday that the proposal would hurt companies organized as “pass-through” entities, where commercial income is taxed through personal returns. Senate Finance Chairman Orrin G. Hatch, R-Utah, said the budget blueprint would hamper business owners by limiting itemized deductions and by changing the tax treatment of retirement savings. Hatch accused Obama of “changing the rules on small-business owners that have been playing by the rules” and “punishing them for doing right by their workers and savings and investing successfully.”

On the SBA budget, Graves said he appreciates the proposed spending decrease but that the agency should “reduce wasteful spending and refocus on its core programs.”

SBA levels would decrease mainly because reduced subsidy costs for loan guarantees are expected as the economy gains strength.

“Small-business loan guarantees are funded at levels above historical demand but at a greatly reduced subsidy cost . . . largely due to the improving economic forecast and lower estimated loan defaults,” the administration’s proposal said. The president’s budget would provide $810 million through regular appropriations, down $109 million from the 2012 enacted level. The budget calls for an additional $159 million in disaster funding to provide low-interest loans to affected homeowners, renters and businesses of all sizes.

The proposal includes $112 million in subsidies for the agency’s business loan programs, which would support nearly $28 billion in guaranteed lending. By comparison, Obama requested $497 million last year for upfront subsidy costs, in order to support $26 billion in loan guarantees.

The $28 billion would include $17.5 billion in guaranteed loans under the SBA’s 7(a) loan program, which helps small businesses expand. It also would include $6.3 billion in guaranteed lending under the 504 business loan program for small-business-related real estate development.

Obama also proposes increasing guarantees for the Small Business Investment Company program by $1 billion, bringing the program to a proposed $4 billion. The budget says this would “enable SBICs to invest in more high-growth and impact-oriented small businesses that create jobs and strengthen communities.” The administration predicts that the boost would not increase subsidy costs to taxpayers.

The budget calls for $4 million to hire 32 new procurement center representatives; $40 million for the Emerging Leaders program, an entrepreneurial education initiative launched in 2008; and $5 million for the SBA’s Regional Innovation Clusters program, which is meant to encourage partnerships between universities and the private sector.

“Programs that have a track record of helping small businesses the most,” Graves said, “should be the priority, like funding for procurement center representatives, which is congressionally mandated, rather than unauthorized and unproven pilot programs, such as the Regional Innovation Clusters and Emerging Leaders programs.”

The proposal also would waive fees on 7(a) loans less than $150,000, reauthorize a 2010 commercial-mortgage refinancing program and provide $7 million for SBA One, a project aimed at streamlining the loan application process for SBA lenders.

It calls for $210 million for non-credit technical assistance, $7 million for business training for veterans transitioning to civilian life and $6 million for an interagency streamlining initiative.

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