The election is over; the votes are counted. The Republican Party controls the White House, Senate, and House of Representatives. Conventional wisdom holds that Republicans are good for business, but are they good for all businesses or just big business?
Both parties swear devotion to small business, but the real goods go to the biggest companies. Through both Democratic and Republican administrations, I've seen very little tax legislation directly and specifically aiding small companies.
In fact, some policies aiding big companies actually hurt smaller ones. Tighter bankruptcy laws, for instance, help big banks and big corporations, but may make it more difficult for an honest entrepreneur to start over after a failed small enterprise.
Small business wants solutions, not exemptions. In the past, the primary response to the needs of small business has been to exempt them from legislation -- family leave, employee benefits, workplace safety. That assumes small business owners don' t want to offer their employees benefits or a safe workplace. They do. It's just expensive, and they need help.
So, with Republicans firmly in control, I challenge the Administration to specifically aid small business, starting with:
- Small business capital gains tax incentive: It's risky for investors to put their money in young companies. To help counteract that risk, one of the very few tax breaks specifically for small business has been the preferential capital gains tax rate (14%) for investments in small companies. This incentive could be lost. The Administration faces pressure to eliminate ALL capital gains taxes, effectively eliminating the small business tax incentive.
- "First employee" tax credit and one-year payroll tax amnesty: Ask any small-business owner, and they' ll tell you the most difficult employee to hire is their very first one. It's costly as well as scary. There were 16.1 million "non-employer" businesses as of 1999. They take in plenty of money -- $667 billion. Most of these businesses won't suddenly hire just because they get a tax benefit, but if a mere 5% hired their first employee, small companies could add 800,000 new jobs.
- Creative solutions for health insurance: Our dependence on employer-provided health care developed after World War II, when we expected employers to be big companies. Now, more than half of all Americans are employed by small companies. Big corporations can self-insure, but small companies face continually rising premiums. We need a new approach -- one that recognizes that everyone deserves health care, but that making employers pay is an outdated approach.
- Family values in the workplace: When one of my employees adopted a child, I gave him time off -- not because the law required it, but because I valued him as an employee. Small companies don't want to lose their good workers when they have a family or medical concern, they want to help them through it. So, rather than merely exempting us from these laws, how about some kind of tax credit or revolving funds pool for the very smallest companies?
- Technology/equipment tax credit for smallest companies: To stimulate spending, the traditional approach is to increase the Section 179, "expensing" deduction, allowing companies to write off more of their equipment purchases. But increasing the deduction from $24,000 to $30,000 doesn't affect the one-person business relying on a five-year-old computer. Our economy needs a boost, and these tiny companies need to become more competitive. How about a small tax credit for updating technology?
- Alternatives to oil: I publish books. They're shipped from the printer, to the distributor, to the bookstore. That's a lot of trucking and a lot of gas. Every time the price of oil goes up, my profits go down. Every small business depends on shipping, not to mention keeping the lights on and equipment running. Short term, the government can help small companies become more energy efficient and by doing everything it can to keep oil prices as low as possible. Long term? We need a national commitment to oil alternatives and programs that encourage small companies to innovate new energy solutions.
The Republicans now have control and a mandate. The question is how they use it. Will they help your business or mine?
Copyright Rhonda Abrams, 2002
Rhonda Abrams writes the nation's most widely-read small-business column and is the author of The Successful Business Plan, Wear Clean Underwear, and The Successful Business Organizer. Register to receive Rhonda's free business tips newsletter at www.RhondaOnline.com.