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updated 10/16/2008 1:13:19 PM ET 2008-10-16T17:13:19

Restoring the health of the U.S. economy will dominate the domestic agenda of the next president, whoever he is.

John McCain and Barack Obama have fundamental differences on how to do that. McCain emphasizes the role that low tax rates play in economic growth, while Obama thinks government investments in targeted areas, such as alternative energy and the creation of new businesses, are important.

Both, however, will be constrained by fiscal realities — the ballooning federal deficit and the still-uncertain cost of the nation's financial crisis. They may have to drop or defer large chunks of their agenda.

For businesses, one thing seems clear: Companies will face more government regulation. Both candidates are "likely to be big regulators," said Veronique de Rugy, senior research fellow at the Mercatus Center at George Mason University.

This report looks at how the outcome of the election could affect small businesses in four key areas: taxes, health care, energy and the rules governing union organizing.

Taxes
John McCain claims Barack Obama wants to raise taxes on small businesses.

That is true if the business owner makes more than $200,000 a year (or $250,000 per family). Obama has proposed increasing personal income tax rates for the top two income brackets to what they were during the Clinton administration: 36 percent and 39.6 percent.

Rates for other income brackets would be unchanged under Obama's plan.

Earnings at most small businesses are passed through to their owners for tax purposes and are taxed at individual income tax rates.

Only 2 percent of taxpayers with small business income will pay taxes at the two highest rates in 2009, according to the Tax Policy Center.

Obama's proposed tax hike, therefore, would affect relatively few small businesses.

These small business, however, are "an important slice of the small business community," said Todd McCracken, president of the National Small Business Association. They tend to be higher-growth small businesses that create more jobs than lower-income companies, he said. "You don't want to give those people reasons to do unproductive things," such as sheltering their income.

A business owner who makes about $300,000 a year probably puts $100,000 of that back into the business, said Dewey Martin, a certified public accountant in Hampden, Maine, who represents about 125 business clients and also chairs the accounting department at Husson College.

"If you take money out of their pockets, they're not going to be creating jobs," Martin said.

Obama also has proposed tax cuts for lower- and middle-income Americans, however, so most small businesses would pay lower taxes under his plan, according to his campaign.

McCain has proposed making the rate cuts adopted during the Bush administration permanent, including the 15 percent rate on capital gains and dividends.

He also proposes reducing the corporate tax rate from 35 percent, which he says is the second-highest rate in the developed world, to 25 percent to make U.S. businesses more competitive

Health care
John McCain and Barack Obama would go in opposite directions when it comes to the employer's role in providing health insurance.

McCain's health care plan would encourage individuals to buy insurance on their own. Health benefits provided by employers would be taxed as income. Individuals would receive a $2,500 refundable tax credit ($5,000 for a family) for health insurance premiums. They would be able to purchase any plan offered anywhere in the country.

Obama, by contrast, would require all but the smallest employers to provide health insurance to their workers or pay additional taxes to the government. Small businesses would receive a tax credit to help offset the cost of health insurance.

Individuals could buy insurance from a national health insurance exchange, which would offer various plans, including a government-sponsored plan similar to the coverage now provided to federal employees.

McCain contends his plan would reduce health care costs by making individuals better health care consumers and by increasing competition among health insurers. Employer-provided coverage would still be an option, he said, and individuals would be able to take their insurance plan with them from job to job.

Critics, however, said McCain's plan would gut the employer-based system, which provides most Americans with their health insurance, by removing the incentive to offer health benefits.

"I don't think politically it's going to be possible to throw off the employer-based system," said John Arensmeyer, chief executive officer of Small Business Majority, a national organization that prefers Obama's approach.

Obama's proposal, however, also would face political challenges, despite Democratic control of Congress.

The economy likely will remain weak when the next president takes office. As a result, a "pay or play" insurance requirement for businesses would be "extremely difficult to push through," said Karen Kerrigan, president and CEO of the Small Business and Entrepreneurship Council.

And Obama's tax credit likely won't be large enough to enable small businesses to afford the benefit-rich coverage available through his national insurance exchange, Kerrigan said. Obama is "out of touch with how expensive it might be for small businesses," she said.

Still, Kerrigan sees a chance that Congress would create some sort of federal insurance pool and provide small businesses with tax credits for insurance purchases. Comprehensive health care reform is less likely, she said. Video: SBA chief on the economy

"When that happens, that's when you lose people," Kerrigan said.

The financial meltdown, high gasoline prices and spiraling budget deficits also may have made health care reform less urgent than other priorities.

Only 4 percent of small business owners said health care was the top issue in this election in a survey conducted in September for Discover Financial Services. That compares with 52 percent who said the economy was the top issue. Health care also trailed the war in Iraq, government ethics and corruption and immigration.

Arensmeyer, however, said action on health care can't wait, since fewer small businesses can afford to provide coverage every year.

"This is yet another crisis we need to deal with," he said.

Energy
Both John McCain and Barack Obama have issued plans on how the nation should meet its energy needs while addressing global warming, but some small business owners aren't impressed.

"I don't know that either candidate has come up with a complete package or plan for energy independence," said Eric Donaldson, president of Hot Shot Delivery Inc. in Houston.

High gas prices have cut into the profit margins of Donaldson's company, which provides same-day delivery services for everyone from attorneys to manufacturers.

He would like the U.S. to produce more of its own oil. But drilling isn't enough, Donaldson said. There needs to be a bigger push to build more refineries in the U.S.

"We can drill all we want, but if we can't refine our product, it doesn't matter," Donaldson said.

No new refineries have been built in the U.S. since the 1970s, a situation that McCain blames on excessive regulation. Environmental groups, however, contend oil companies are limiting refining capacity to keep the price of gasoline high.

Obama, meanwhile, has proposed federal incentives for investment in ethanol and biodiesel refineries, but building more oil refineries doesn't appear to be a priority for him.

Both candidates also are neglecting the role small businesses can play in solving the nation's energy problems, said Scott Hauge, who owns a business insurance agency in San Francisco and serves on a state committee implementing California's law capping greenhouse gas emissions.

"I don't see either one talking about it," said Hauge, who also is president of Small Business California, an advocacy organization.

Both McCain and Obama talk about the role innovation and entrepreneurs can play in developing alternative sources of energy, but neither offers specifics on what that means for small businesses, Hauge said.

They also are not addressing the significant contribution small businesses can make by becoming more energy-efficient, he said, noting that small businesses consume about half the energy used for commercial purposes, and about 30 percent of the energy they use is wasted.

The presidential candidates have said nothing about programs that would help small businesses use less energy, such as on-bill financing, which would allow small businesses to pay for energy efficiency improvements through their monthly electric bills, Hauge said.

Both candidates support legislation to cap carbon emissions and create a system for trading carbon credits, although Obama's timetable is more aggressive.

Even though now might not be the ideal time to impose such a potentially costly mandate on the economy, the nation may be running out of time to combat global warming, Hauge said.

"If it's really a serious problem, it just seems to me you've got to find a way to get money to solve it," he said. "We're talking about the human race here."

Both presidential candidates support tax incentives for alternative sources of energy, and that is good, Donaldson said.

But oil companies also need incentives to drill for oil in hard-to-reach places, he said. "My car doesn't run on wind."

Labor
Businesses could expect a lot more union organizing activity if Barack Obama is elected, and Democrats strengthen their control of the Senate.

Obama is a co-sponsor of legislation to make it much easier for unions to organize workplaces.

The Employee Free Choice Act would allow unions to represent workers if 51 percent of employees sign a card indicating they want a union. No election would be necessary.

The bill is the AFL-CIO's top legislative priority. It passed the House this Congress, but died in the Senate.

President Bush promised to veto the bill, and John McCain opposes it. Both contend the legislation is undemocratic because it denies workers the right to a secret ballot.

Giovanni Coratalo, executive director of the U.S. Chamber of Commerce's small and midmarket business councils, said he has heard more concerns from businesses about the Employee Free Choice Act than any other issue besides the economy.

"Small businesses should be afraid of this," Coratolo said. Video: SBA chief on the economy

If the Employee Free Choice Act is enacted, "every type of business will be targeted because [organizing] will be so easy," said Keith Ashmus, a partner in the Cleveland law firm Frantz Ward LLP, who chairs the National Small Business Association's presidential elections task force.

Only 16 million workers now belong to unions — 12 percent of the nation's work force, according to the Bureau of Labor Statistics.

Neil Golub, chief executive officer of Price Choppers Supermarkets, a 116-store chain based in Schenectady, N.Y., said the Employee Free Choice Act is the union movement's "last stand" to change "the playing field for collective bargaining."

Golub, who has been working on coalitions opposing the Employee Free Choice Act for the past two years, said the bill should be called the "Forced Choice Act" because employees would be coerced by union organizers to sign the union cards.

But Bill Samuels, the AFL-CIO's director of government affairs, said the only people circulating these cards would be co-workers -- union organizers are not allowed on a company's property. Some employers already voluntarily recognize the results of card check organizing campaigns, and "there's no history of coercion to sign authorization cards."

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