No doubt it, this winter's been a tough one.
The record-breaking cold. The snow. The travel delays. Troubles in Europe. Struggling retail sales. Plummeting business and consumer confidence. The economy continues to limp along. More people are giving up their search for work. The 76ers are on a historic losing streak, and DiCaprio lost the Oscar…again. Curses, winter!
As I write this, close to $2 trillion in cash remains on corporate balance sheets. Why? It's been tough running a small business. Tougher than it was even as recently as Christmas. And not just because of the reasons above. It's mainly because of some big changes and announcements from Washington that have thrown more obstacles in the way of business owners like me. Here are just five.
1. Taxes. In 2013, tax rates went up for Medicare and capital gains. In addition, a new tax on unearned income was imposed and higher tax rates are now levied on the highest earners. Deduction ceilings were also increased and pre-tax deductions for certain flexible-spending accounts related to health care were limited.
As we sit down across the table from our accountants, we're now learning just how much more we need to pay this year to cover last year's tax expenses. Not only that, but our accountants are explaining to us how many deductions and credits that helped businesses in prior years, such as accelerated depreciation and research and development, have expired at the end of last year.
Now, the talk in Washington is about "tax reform" and, given the past few years, many of my clients are interpreting that as more tax increases.
2. Health care. The Affordable Care Act, which has been law since 2010, now requires that everyone have health insurance. Next year, companies with more than 100 full-time equivalent employees must provide affordable insurance, and in 2016, that extends to companies with more than 50 full-time equivalent employees. The Obama administration has changed certain rules in response to problems related to the health care website and coverages. This has caused headaches for insurance companies, confusion for employees and concern that rates will continue to rise even more significantly than before.
3. Minimum wage. The President has raised minimum-wage requirements for federal contractors, which affects tens of thousands of small businesses. He's lobbying to increase the minimum wage nationwide. There are good reasons for this, and there are good reasons against it.
That legislation will be passed this year is unlikely, given the current environment in Congress. But we could see this within the year, depending on the results of the mid-term elections.
Most of my clients pay well above the minimum wage. Others see it as an assault of their freedom to run their businesses as they choose. The debate is not doing much to improve the overall business environment.
4. Overtime regulation. The President last week issued orders to the Department of Labor to update the U.S. federal overtime-compensation requirements. He believes that there are many "salaried" employees who are working too many hours and not being fairly paid.
Like his position on minimum wage, he does have good reason. But the timing is not great.
Again, we take up defensive positions against another government rule requiring us, without recourse, to pay our people more. Our response to this (and for some, the minimum-wage debate) is to look for ways to not hire more people, to outsource, to find technology that we can afford to keep "human" costs down. Instead of looking for ways to grow, we are forced to come up with ways to save.
5. Financing. Since last year, we have been without a confirmed chief of the Small Business Administration. Say what you want about the SBA, the agency is responsible for billions in loans to small businesses and without direction there is uncertainty. In addition, many small businesses are waiting for a final ruling from the SEC on crowdfunding legislation. These two policy directions will have an enormous impact on the ability of companies to get the necessary capital they need to grow their businesses. Unfortunately, due to the politics of Washington, they are barely moving forward.
So what's a business owner to do? Keep our heads down. Don't take any big risks. Conserve cash. Which is exactly what's happening. Yeah, it's been a tough winter alright. Tougher than last winter. Things are more challenging than they were as recently as last Christmas. . . at least for most of the small-business owners I know. I'm not sure if anyone in Washington is able to make things better anytime soon. But at least a measly win from the Sixers once in a while would surely ease the pain a little. Can you at least give a guy that?