Small business owners have been challenged in numerous ways during the past year, with many struggling to keep their companies intact. Top concerns include poor sales, inflation and access to credit coupled with healthcare costs, increased taxes, government regulations and unnecessary bureaucracies.
Research suggests that smaller firms have been able to recover from economic downturns with respect to employment growth more rapidly than their larger counterparts. Net job creation in the immediate years following the 1990-91 and 2001 recessions stemmed from employment generated by small firms with fewer than 500 employees, while large businesses grew little because of net contractions in employment.
State policies that promote business creation lead to higher employment, gross state product and personal incomes. Yet small businesses face disproportionately higher costs per employee than their larger counterparts in complying with federal regulations.
Entrepreneurs have led the way out of past economic downturns. Current business leaders like Microsoft, Federal Express, Intel, Charles Schwab and Southwest Airlines were founded during recessionary times.
Congress has been informed by numerous sources that small businesses create most of the nation’s new jobs, employ about half of the nation’s private sector work force, and provide half of the nation’s nonfarm, private real gross domestic product as well as a significant share of innovations.
However politicians and bureaucrats who claim to know what our problems are pass weak, election-year legislation to fix them. And they’re not helping to solve our problems.
Currently the Senate is considering legislation called the Small Business Jobs Act of 2010 (HR 5297). This bill contains key provisions that may help America’s smallest businesses in this difficult economic climate, according to the National Association for the Self-Employed (NASE).
The legislation would allow the self-employed (estimated to be 23 million) to take a one-year business deduction for health care costs. Sole proprietors are unable to deduct their health insurance costs as a business expense, leaving them to pay more in payroll (self-employment) taxes than any other business. The self-employed absolutely should receive the same tax treatment on health insurance costs as all other business entities.
A vital amendment to the bill would help simplify the tax code for home-based businesses. With over half of all small businesses run out of the home, the home office deduction is an important tax benefit for small businesses. Unfortunately, the complexity and paperwork burden associated with the home office deduction drives many qualifying business owners to forgo this tax assistance. The amendment would create the option of a standard home office deduction, allowing eligible business owners to avoid the complex calculations and simply opt for the standard deduction amount.
The Small Business Jobs Act which would also increase the deduction for start-up expenses – currently, entrepreneurs can deduct up to $5,000 of expenses with a $50,000 phase-out. The bill would increase the deduction to $10,000 with a $60,000 phase-out threshold beginning in 2010.
Other legislation being considered by the Senate would lift taxes on capital gains for investors who buy a small company’s stock between now and the end of the year. And the bill would allow businesses to “carry back” tax credits to offset taxes paid on prior years’ earnings.
The new bill has provisions to help small businesses get more financing. The largest piece is the $30 billion Small Business Lending Fund, which would offer small banks government capital with incentives to relend the money to small businesses. There are also increased Small Business Administration loan guarantees, higher limits on certain SBA loans and microloans and expanded SBA “express” loans.
All of this ‘help small business’ stuff sounds great, but once again Congress is dangling gimmicks at us and will send it out to the bureaucrats at the Small Business Administration who continue to find all kinds of ways to make it not work.
Remember the American Recovery and Reinvestment Act, which supposedly invested $787 billion in infrastructure development, educational facility improvements, broadband access, scientific research and tax incentives. It also increased funding for the SBA by $730 million; a significant portion of that increase lowered the fees for SBA-guaranteed loans. Please find a business that was actually helped in Central Oregon by any of this money?
It’s important to let your congressional representatives know how important it is to pass legislation favoring small business. But it is even more important that you tell them legislation and loan packages are not going to help if the people in charge of them make it so complicated you just throw your hands up in the air and walk away. pha