Obama's 17 tax breaks for small business: Big whoop!

NEW YORK (Muchfinance) — President Obama has passed 17 tax breaks and credits for small businesses. But when it comes to job creation, they don’t add up to much.
The scope of the tax breaks and credits is too narrow, the requirements too specific, and — in some cases — the process too onerous to get firms off the sidelines and onto the hiring battlefield.
“It’s nice that you announce these things, but the question is how many actually make a difference,” said Bill Dunkelberg, chief economist with the National Federation of Independent Business. “If I give you this cash gift in some form through all these tax credits, why would you suddenly desire to go hire somebody?”
Bringing on an employee is a long-term, expensive proposition that a business owner will not undertake unless the new employee will pay for itself in additional productivity, said Dunkelberg. “Getting a tax break doesn’t change the value that a new employee brings to a company.”
With the unemployment rate stuck at a stubbornly high 9.1%, the recovery of the economy depends on the nation’s ability to create jobs. And since small businesses are responsible for creating about two-thirds of the new jobs in this country, supporting them is crucial.
That’s why many will be all ears tonight when President Obama lays out details for his $300 billion job creation plan.
Nearly half of Obama’s 17 tax breaks and credits were included in the Small Business Jobs Act, passed last September. One tax benefit allows small businesses to write off up to $500,000 worth of new equipment purchases last year and in 2011. And some of the tax credits, like the break for hiring unemployed workers, have already expired. The break on health care costs is available for a maximum of six years.
Dear Mr. President…
The tax credits, in some cases, are simple and attractive to small businesses, even if they have had limited impact on an owner’s decision to get out of bunker mode and start hiring. Increasing the cap on how much a small business can expense, for example, was an especially easy-to-understand tax change, according to Bill Rys, tax counsel for the NFIB.
Others, like the zero capital gains tax on some small business investments, are so specific that they touch only a narrow segment of the sector, said Rys. And then ones like the health care tax credit are just too complicated to be of much use: “The challenge is you have to meet a number of different conditions to get it,” he said.
It all comes back to jobs. “The truth is it is pretty hard to trace specific tax policies back to jobs created,” said Joseph Rosenberg, a research associate at the nonpartisan Urban-Brookings Tax Policy Center. “There is simply too much going on.”
The tax credits may motivate a few small business owners who are on the verge of making an investment already, but they aren’t going to spur many of them to run out and make hires and purchases they don’t need, said Rosenberg.

“What you are doing with tax policy is trying to impact things on the margin, you are trying to find that business that is very close to hiring, very close to buying that new machine,” said Rosenberg. “You can fiddle with all these different tax levers, but at the end of the day what small business really needs is for the economy to recover.”
For companies looking to hire, a payroll tax credit would be a boon: Small business owners who are growing and already planning to hire would be able to pay their new hires more or hire more quickly if a payroll tax credit were enacted.
Blue Sky Senior Living, an assisted living startup in Southfield, Mich., will be hiring about 120 people in the next year. And co-owner Nathan Mazur is interested in a payroll tax that would put money back in his pocket — even if it is just temporary.
“People that are taking care of mom and dad are making $8 an hour in this industry,” said Mazur, who plans to pay his staffers $10 per hour. But if he had access to a payroll tax credit, he would bump up that hourly wage even more. “I would never put my parents in a place where the workers are being paid $8 an hour. It just doesn’t add up.”
Zalmi Duchman, owner and CEO of TheFreshDiet.com, would also welcome a payroll tax credit. His firm delivers prepared, fresh food to clients across the country. Based out of Surfside, Fla., the five-year-old small business has been growing rapidly since. It currently has about 230 full-time employees and 70 contract employees across the country.
Hiring: Yes. No. Maybe so.
“We are always hiring because we are growing. But I wouldn’t say we are super-hyperactive hiring,” said Duchman. A payroll tax credit would motivate him to pull the trigger, he said. “You are growing and obviously you need to hire somebody that is going to help you generate revenue.”
If a new payroll tax credit carried similar stipulations about who he could hire to receive it, Duchman might only be inspired to make one or two hires. But Duchman would hire more like five to 10 people if the tax credit were straightforward and immediate.
The ability to access capital is key to helping the business to expand, said Richard Silverman, TheFreshDiet.com’s CFO.
“It is capital availability that matters, not the tax rate that you pay,” said Silverman. “The difference between us paying a 35% corporate tax rate and a 25% corporate tax rate is peanuts at the end of the year compared to our ability to raise a couple million dollars when we need it. That is what is important. That is what creates jobs.

Main Street on Obama's jobs act: Nice. Blech. Huh?

“Small businesses like mine are in a daily struggle for survival — we need immediate relief!” said Evan Saks the founder of Create-a-Mattress.com, a custom mattress online retailer with three employees. “Payroll tax incentives are a drop in the bucket against the backdrop of historic industry wide sales declines,” he said.
Consumer spending is also a top concern for Marc Rothenberg, the president of Intercept Silver & Jewelry Care Company. Payroll taxes don’t impress him. “If consumer demand does not increase, owners will not need to hire and they will just ‘pocket’ the extra savings,” he said.
Then there was doubt that Congress would actually pass the proposed law.
“The tone was forceful, and I agree with most of the initiatives in principle,” said Saks. “But we’ve seen all these ideas before, and the political reality is expecting cooperation from this Congress is wishing for dancing fairies riding unicorns on rainbows. They can’t agree that grass is green.”
Main Street: Encouraged and hopeful: “I felt the recognition of small business as what drives this country’s economy was tremendous,” said Anton Semprivivo, the general manager and vice president of the Honda dealership in Toms River, N. J.
Semprivivo said that he liked the proposals to cut payroll taxes, give businesses tax credits for hiring the long-term unemployed, and the effort to reduce burdensome regulations.
Hiring: Yes. No. Maybe so.
Zalmi Duchman, the owner and CEO of TheFreshDiet.com, said he also liked the proposal to cut his payroll taxes. With 300 employees, a payroll tax credit could really add up.
“Although I was hoping to hear him say he wants to cut it completely, I was not expecting him to say it at all,” said Duchman. “Cutting our payroll taxes in half for 2012 can be a big boost for us, and I am sure other small businesses.”
Duchman was curious to hear the president indicate he will be working to decrease regulation. Although, barring much in the way of specifics, Duchman was cautious: “How exactly will he accomplish this? To me, it seems impossible.”
And, despite his critiques, Zane was generally impressed with the President’s resolve. “I was impressed! Not necessarily by any one specific point, but by the fact that the president’s jobs act seemed to be balanced and reasonable.”
Meanwhile, some small businesses are still trying to understand what the whole speech means for them. “We, at Baked, are not quite sure how the new initiatives will help us directly,” said Matt Lewis, a co-founder at the Brooklyn-based bakery. “We still need time to piece the information together.

The startup that died so Instagram could live

SAN FRANCISCO (Muchfinance) -- Go where the people are, and do it fast.
That's the message a panel of skilled entrepreneurs spread Tuesday afternoon at TechCrunch Disrupt, a San Francisco gathering for the tech industry's startup crowd.
Instagram co-founder Kevin Systrom said one of the key reasons his product was successful was his close attention to user feedback. Before Instagram became a hit photo-sharing app, Systrom was working on a check-in service called Burbn.
During a meeting, Systrom and his crew decided to shift gears.
"I remember what I'll call 'pivot day.' We sat down and said 'what are we going to work on next? How are we going to evolve this product into something millions of people will want to use?'" he said. "What is the one thing that makes this product unique and interesting?"
The answer was photos. Instagram, which launched 10 months ago and is still an iPhone-only app, now has more than 9 million users.

Systrom, Intuit founder Scott Cook, and Lean Startup author Eric Ries talked about the changes that have swept through product development in both big and small organizations. Many companies have moved from what's called "waterfall development" -- a method that relies on large engineering executing a carefully mapped-out plan -- to "lean" development, where creators move quickly to push out products and revise them on the fly.
"We thought about what we could do to iterate more quickly," Systrom said of Burbn's pivot. "People loved posting pictures on Burbn" -- so that's where they took the venture, jettisoning other planned features. Burbn now lives on only as an abandoned Twitter feed.
Cook said he applied the same method to Intuit (INTU), a company much larger and more mature than Instagram.
"We found we had big efforts that were delivering failed products," he said. "I got sick of the wasted engineering time."
Cook now gives his employees what Ries described as "an island of freedom to do experimentation," something few large companies are known for. Employees working on certain ideas report only when they have something to report, Cook said.
Ries suggested startups have regular "pivot" meetings. His other piece of advice: Don't rely on "vanity metrics." A large user count sounds great, but what really matters is how committed your users are to the product.

9/11 memorial owes elegance to small business

NEW YORK (Muchfinance) -- In December 2003, landscape architect Peter Walker was ready for retirement, but a chance to work on the 9/11 Memorial put the brakes on that.
The call came from Michael Arad, who was one of the eight finalists in the World Trade Center Memorial Design Competition that included more than 5,200 entries from 63 nations.

Peter Walker helped with the landscaping of the 9/11 Memorial.
The 13-member jury, which would ultimately select the winning design, advised Arad that he needed to work with a landscape architect.
Arad's austere design, titled "Reflecting Absence," featured two voids -- large square areas -- with fountains and reflecting pools. The square spaces are each a city block in length, and they represent the footprints of where the Twin Towers once stood.
Jury members "loved the idea of the big voids," Walker said. "But they really disliked seven acres of stone plaza. The memorial also needed to operate as a public open space. Next to Hong Kong, that neighborhood is probably the densest neighborhood in the world."
Turning tragedy into triumph
So Walker envisioned Arad's two waterfall-filled tower footprints embraced by sculptural columns of trees, which would provide scale, texture, variety and a sense of human comfort. And with Arad on board, the jury in January 2004 selected "Reflecting Absence" -- and extended Walker's five-decade career.
Walker was a cofounder of the firm Sasaki, Walker and Associates, which was established in 1957. He opened its West Coast office, which became The SWA Group, in 1976.
As principal, consulting principal and chairman of the board, he helped to shape The SWA Group as a multidisciplinary office with an international reputation for excellence in environmental design. In 1983, he formed Peter Walker and Partners, now known as PWP Landscape Architecture, in Berkeley, Calif.
Walker has had a significant influence on the field of landscape architecture. He has taught, lectured, written and served as an adviser to numerous public agencies. In 2004, Walker won the ASLA medal, the highest honor that the American Society of Landscape Architects, a trade association, may bestow upon a landscape architect.
"Peter Walker is one of the most distinguished landscape architects practicing today," said Nancy Somerville, executive vice president and CEO of the trade group. It is "no surprise that he's the landscape architect for the 9/11 Memorial."
Walker said his vision for the 9/11 Memorial and surrounding plaza, which carried a price tag of around $50 million, was the interworking of three metaphors: If Arad's voids represented loss and sadness, then the flat plane of the design would symbolize the earth, and the trees, a forest of 412 swamp white oaks, life. The trees currently stand about 30 feet high but are expected to grow as high as 60 to 70 feet, providing a solid canopy everywhere except over the voids.

"New York is so rough on trees," Walker said. "So much soot in the air and so much radiation that the average tree in New York only lives seven or eight years."
Working with a team of consultants, PWP developed an intricate system to address the complex requirements of planting trees within a paved environment. The firm created a soil mix that would be strong enough to support the paving above while still allowing the necessary mix of oxygen and water to reach the roots of the trees. It then developed an irrigation system that would carry air and water to the roots.
PWP, a corporation, employs 30 professionals and five staff members, all of whom participate in an Employee Stock Ownership Plan, a benefit plan which makes the employees of the firm owners of stock in the company. "Our capital investment is in our people," Walker said.
The company garners just over $6 million in annual revenues. During the recession, Walker reported that revenues continued to remain steady, buoyed by an emphasis on overseas clientele, although profits had decreased.
Walker and his team are currently working on building Barangaroo Headland Park in Sydney, Australia, which he said is nearly twice the size of the 9/11 Memorial.
"I'm 79, and I'm not sure how long I'll be at this," Walker said. "But if you're doing things you really love, it's a lot easier to get up in the morning. Your bones may ache, but your head is working okay.