Small Business Reacts to Obama’s State of the Union

Small business was mentioned three times in President Obama’s State of the Union speech, and here’s reaction from advocates for Main Street.

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No. 1: Minimum Wage

“Raising the minimum wage is a real scary thing: $10 up from $7 is a huge jump,” said Bill Dunkelberg, chief economist for the National Federation of Independent Business. “Unemployment for teens is high, and this will certainly increase it,” he added, predicting the service sector would be hardest hit by mandated wage increases.

House Small Business Committee Chairman Sam Graves said employers know best when it comes to wages.

“He talked about a business out there that voluntarily had stepped up and is paying higher than minimum wages. That is what capitalism is! That’s what the free market is. They want to attract good employees, so they’re willing to pay a different wage,” said Graves.

The National Small Business Association said a higher minimum wage for federal contractors alone will hurt some small businesses, not to mention a potential hike to the federal minimum wage. As of 2014, 21 states and D.C. have minimum wages above the federal minimum wage, according to the National Conference of State Legislatures.

“President Obama’s pledge to sign an Executive Order to bump federal contractors’ minimum wages up to $10.10 would create a competitive disadvantage for small contracting firms who also operate in the private marketplace. Such a large increase will force increased prices, making them less competitive in the private marketplace where many of their competitors aren’t federal contractors,” said the NSBA in a statement released after the speech.

Small Business & Entrepreneurship Council President Karen Kerrigan said a higher federal minimum wage is a big concern for entrepreneurs – but it doesn’t seem likely.

“I don’t see it passing in federal law,” said Kerrigan.

No. 2: Immigration

While some small business groups cheered on the president’s call for immigration reform, others disagreed with his approach.

“Obama’s call to enact immigration reform ought to be taken seriously by Congress where legislation should be sought that ensures appropriate access to workers of all skill levels without unfair or overly burdensome requirements,” said the NSBA.

Graves, however, said he disagrees with any immigration policies that grant amnesty to illegal immigrants.

“I’m not in favor of any amnesty whatsoever. No matter how he wants to dress it up, it’s going nowhere in the House,” said Graves.

Dunkelberg, speaking on behalf of the NFIB, fell somewhere in the middle. He said he’d like to see immigration reform that would allow talented workers with needed skills come to the U.S.

“Can we invite the people we want? Or are we letting the people who decide they want to come here come in, which is the way we’ve been doing it,” said Dunkelberg.

No. 3: International Trade

While Dunkelberg said the majority of small businesses wouldn’t be helped by reducing international-trade barriers, some small manufacturing companies could see a positive effect.

“Small manufacturers in the supply chain of exporting firms would benefit indirectly,” said Dunkelberg.

Graves would like to see free trade promoted, but says he’s cautious of getting overly excited when it comes to the president’s promises to act on this issue.

“If the president is serious about this and wants to continue to move down this road, I’m supportive … But he has shown in the past that he just wants caveat after caveat,” said Graves.

No. 4: Tax Reform

While the groups showed support for a “simpler corporate tax code” proposed by President Obama, they said many small businesses would be left out in the cold.

The NSBA said addressing only corporate tax rates could actually result in higher taxes for most small businesses, 83% of which are structured as pass-through entities.

The NFIB also said in a statement that corporate reform lends a helping hand only to big business.

“Championing a corporate-only tax reform scheme (which misses 2/3rds of small businesses) … the President seems determined to pick winners and losers,” the NFIB wrote in a release.

But the SBEC’s Kerrigan said even corporate-only tax reform is a start.

“There’s extraordinary bipartisan opportunity in the House and the Senate to get something done. It may not be comprehensive … but it would be some kind of tax reform,” said Kerrigan.