Speaking in Baltimore on Friday, President Obama described his plan to encourage hiring by offering tax cuts to small businesses as "a simple, easy-to-understand mechanism that will cut taxes for more than 1 million small businesses."
Here's the basic outline of the plan: For every new employee a business adds during 2010, it will receive a $5,000 tax credit, up to a total of $500,000. To sweeten the offer a bit more, employers will be reimbursed for the increased Social Security taxes that will be levied for payroll increases. It remains to be seen, of course, what impact this will have, but the administration expects it to affect about a million employers. And according to the Small Business Administration, small businesses account for about half of the American workforce.
Sounds pretty good, right? Well, there are hesitations already. A similar plan was floated last year, but Congress couldn't figure out how to make it work. Tax experts have a variety of questions about how everything might come together.
Coming from an entirely different angle is Mark Cuban, the flamboyant cable tycoon and owner of the NBA's Dallas Mavericks. Cuban likes to challenge authority, and the president is no exception. The claim here: the plan isn't as "simple [and] easy to understand" as Obama imagines.
On his personal blog, Cuban writes that "like the administration before it, the current administration seems to have no concept of what it takes to start, run, and grow a small business. None." The idea on the table, although giving with the right hand by cutting the amount of taxes a small business would pay, takes with the left, by making their accounting situations more difficult. Instead of layering weird loopholes atop an already-elaborate structure, Cuban would like to see the tax code simplifed:
If you REDUCE THE OVERHEAD of small business, you effectively create capital for them through reduced costs. Not only do you improve their financial position, but you reduce that great big time suck known as dealing with your accountants and lawyers. The more time wasted with "professional services," the less time spent doing your job. This seems to be a concept lost on government.
By the same token, he says, the government should stop trying to loosen up loans to small businesses. Easy money, he says, is bad because small businesses tend to do poorly with debt. The answer? Again, cut overhead costs so they don't need loans.
What do you think of Cuban's ideas? Is he cutting through bureaucratic red tape, or is this just a case of antiregulation ideology driving a thought process?