BOSTON (TheStreet) -- President Barack Obama focused part of his State of the Union Address last night proposing tax incentives for small businesses, acknowledging that, lately, "it seems like bad behavior on Wall Street is rewarded but hard work on Main Street isn't."While tax cuts, if Congress passes them, might spur growth at companies with fat order books looking to reduce costs, they would provide little solace to broken businesses that have no money left to spend.
"Capital equipment and facilities purchases tend to be major decisions for small businesses that require building a business case, cash-flow analysis and a good bit of advance planning," says Ron Seide, president of Summit Data Communications, a small technology hardware business in Akron, Ohio, that has increased its workforce by 30% in the past year. "If the business case and the cash isn't there, no amount of tax breaks will result in an expenditure on new capital equipment and facilities." And tax incentives won't help companies that can't justify new employees because there's no work for them to do. "Every person and business would like to keep more of the money they make," says Dave Shulman, one of six employees at The Environmental Technology Center, a small electronics-systems integrator in Boston. "That being said, taxes are not causing the problem for small businesses. The decline in business is the major issue for small businesses. For a small business, sales drive the company. Everything else is a high-class problem. If there's no work, there's no money and no taxes." Obama acknowledged that small businesses are dangerously short on funds and offered a proposal similar to that of the Bank on Our Communities Act of 2009, sponsored by Oregon Sen. Jeff Merkley, which is under Senate consideration. Obama proposed taking $30 billion of the money repaid by bailed-out Wall Street banks such as Citigroup ( C) and AIG ( AIG), and using it to fund small-business loans from community banks to "give small businesses the credit they need to stay afloat." "When you talk to small-business owners in places like Allentown, Pa., or Elyria, Ohio, you find out that even though banks on Wall Street are lending again, they're mostly lending to bigger companies," Obama said last night. "Financing remains difficult for small-business owners across the country, even though they're making a profit." -- Reported by Carmen Nobel in Boston.