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Storming the Hill

Now that the Republicans are in command, the small-business lobby hopes this new congressional session will bring it more victories than losses. Here's the view from the field.
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For the small-business lobby, it's go time.

When the new Congress gets down to work this month, there will be a batch of small-business ideas at the top of its legislative agenda, and a Republican-dominated Senate eager to help push some of them into law. "I think there's been a real niche within the Republican Party for small business; it's sort of consistent with our ideology," says Senate Small Business and Entrepreneurship Committee chair Olympia Snowe (R-Maine). The recent switch in the Senate from Democratic to Republican control has elevated a whole cast of GOP characters to the influential rank of committee chairman, Snowe among them.

The National Federation of Independent Business (NFIB), the 600,000-member interest group that represents small and independent business owners, is ready with a long wish list for this session. "We hope to get a few more things done than we did last Congress," says the group's manager of legislative affairs, Dan Blankenburg. "The NFIB is very definitely in a better position this year," says the new chairman of the Senate Finance Committee, Chuck Grassley (R-Iowa). "Republicans see small business as a job-creating machine." Not, of course, that Democrats have anything against small business. Both parties pay lip service in general; they just fight over details. Here's a look at what's at stake in Washington this year for small business, and at the chances that each of these 10 agenda items important to the NFIB will be signed into law by President Bush.

Bush Tax Cuts

The Agenda: Republicans desperately want to make sure that Bush's 2001 $1.35-trillion tax-cut package becomes permanent. (As of now it's set to expire in 2011.) That includes repealing the estate tax, which Republicans like to call the "death tax." Repeal is viewed as a boon to small-business owners who wish to pass their companies on to their children.

The Prospects: Democrats didn't come out strongly against the tax cuts last fall -- not surprising in an election year. But anti-tax-cut posturing is sure to increase as individual Democrats compete for leadership of their rudderless party and position themselves to run for the Oval Office in 2004. Even so, bet on this package getting through: Republicans have control, they want cuts, and every member of Congress loves an omnibus tax bill that can be larded with all sorts of little-seen provisions and loopholes for constituents and favorite special-interest groups.

Association Health Plans

The Agenda: The NFIB has made association health plans (AHPs) a health-care priority for 2003. The idea is to allow small companies to band together across state lines to form group health plans through industry and trade associations like the U.S. Chamber of Commerce and the National Restaurant Association. That would give small businesses the same flexibility and buying power as large companies and labor unions, which can offer one set of health benefits to all employees without having to carve out specific plans to conform to the quirks of each state's regulations. "AHPs certainly should be looked at," says Senator Judd Gregg (R-N.H.), the new chairman of the Senate Health, Education, Labor, and Pensions Committee. A bill to allow AHPs passed the House but never reached a vote in last year's Democrat-controlled Senate.

The Prospects: "I'm attracted to it," Gregg says, "but we need to find some ways to make sure the insurers of last resort -- Blue Cross Blue Shield -- are taken care of." The sticking point will be what will happen to Blue Cross Blue Shield if other insurers attempt to cherry-pick healthier (and therefore less costly) groups. John Parker, spokesman for the Blues, jokes that his nightmare would be an AHP for a trade association of aerobics instructors, which would be heavily courted by his competition, leaving him with only a more sickly pool to insure. AHPs may never see the president's pen, since entrenched Democrats and insurance-industry players will likely fight it to the death.

Tort Reform

The Agenda: The small-business lobby wants relief from class-action lawsuits -- capping punitive damages and abolishing collective liability for noneconomic damages for companies with fewer than 25 employees.

The Prospects: "Tort reform will be very difficult," says Grassley, "but at least it's on the agenda for us and not for the Democrats." But tort reform isn't going to happen anytime soon. Its opposition includes the powerful Association of Trial Lawyers of America.

Section 179 Equipment Expensing

The Agenda: Snowe, among others, will try to increase the IRS's Section 179 expense limit. Businesses that spend less than $200,000 a year in new-equipment purchases currently can expense $24,000 of those purchases. The new proposal would increase those limits to $400,000 and $50,000, respectively. "I'm a strong proponent of increasing expensing," Snowe says. "This is one of the ways you can sort of single-handedly improve things for small businesses." The argument against it: an increase will cost the Feds money -- an estimated $17 billion over 10 years, according to Congress's Joint Committee on Taxation.

The Prospects: This one could go through this year as part of the overall tax package that the Senate Finance Committee will be sweating over. Snowe's job will be prodding chairman Grassley not to forget about it or let it become a bargaining chip in the negotiations over the total cost of tax cuts to the federal treasury. The Section 179 expense increase was included in both the House and Senate bills last spring, but neither bill made it out of committee. Now it has a chance again.

Government Contracts

The Agenda: Bird-dogging the government on the issue of getting more federal contracts to the little guy will be on Snowe's plate. Federal law requires that 23% of government contracts each year go to small businesses, but agencies don't always follow through. One way to encourage adherence is to eliminate "contract bundling," in which Uncle Sam rolls up a slew of small purchases into a mammoth contract. The small-business lobby says that practice prevents all but the biggest players from effectively bidding.

The Prospects: Government contracting is a hotter issue than ever, with industry eyeing the newly created Department of Homeland Security. (Indeed, months before there even was a homeland-security department, a group of CEOs and lawyers had already created the Homeland Security Industries Association in Washington. The association's president expects tens of billions of dollars in new spending in coming years.) Count on Congress to look at the department as an opportunity to do something about terrorism and as a way to funnel business to folks back home. Growing companies will have a seat at the table, but the biggest dollars, as always, will go to the biggest suppliers with established relationships.

Minimum Wage

The Agenda: Senator Edward Kennedy (D-Mass.) isn't in the majority party anymore, but that doesn't mean he isn't a formidable force. As the ranking Democrat on the Senate's Health Committee, he'll give its chairman, the soft-spoken Senator Gregg, fits with his plan for a minimum-wage increase. In the last Congress, Kennedy was defeated in his attempt to raise the minimum wage for the first time since 1997. (It's now at $5.15.) This time Kennedy wants a $1.50 hourly hike, which his office says would boost the income of 10 million working people by $3,000 a year.

The Prospects: With the GOP in power in both chambers, a minimum- wage increase would generally be a nonstarter. But Democrats are looking for defining issues, voters are angry over the lousy economy, and moderate Republicans could end up voting for a minimum-wage hike. Key here is Olympia Snowe, herself a moderate. "I am sympathetic to [a minimum-wage increase], and I will take a look at it," Snowe says. "Of course, you have to look at the costs to small business." The NFIB, and just about every other business lobby inside the Beltway, will fight hard against an increase, but Kennedy will likely bring the issue directly to the Senate floor, bypassing Republican-controlled Senate committees. One compromise already being floated is to couple any hike in the minimum wage with a package of targeted small-business tax cuts.


"An increase in the IRS's Section 179 equipment-expense limit may go through this year as part of the overall tax package that the Senate Finance Committee will be sweating over."


Automobile Expensing

The Agenda: The NFIB wants an increase in the $14,460 limit that a business can deduct from its taxes in depreciation on an automobile. The NFIB says that number is outdated and that with today's use of SUVs by business, the limit should be raised to $25,000.

The Prospects: Proponents say that as many as 10 million small businesses could take advantage of the proposal, but the IRS is balking at the idea. In the end, congressional inertia and fear of ballooning deficits may conspire to strangle this new idea in its crib -- this year.

Business Checking Accounts

The Agenda: A bill that would repeal the 1933 statute that prohibits banks from paying interest on business checking accounts passed the House last year, but a similar bill by Senator Richard Shelby (R-Ala.) sat stuck in a Senate committee. Leading the charge for the opposition are New York senator Charles Schumer and the New York financial industry.

The Prospects: Now that Shelby is the chairman of the Senate Committee on Banking, Housing, and Urban Affairs, the bill has a chance to get to the Senate floor. But will he give the issue enough attention? Insiders gossip that the senator from Alabama secretly wants to head up the CIA. He's been extremely visible on intelligence issues, pushing hard for post-September 11 reforms in the CIA and FBI, and has already called for top spook George Tenet to resign. Shelby's staff, of course, say he's happy right where he is. But they would say that, wouldn't they?

Home-Office Deduction

The Agenda: With the rise of self-employed professionals (and, yes, the decline in the economy), millions of people are working out of home offices. At tax time they face a confusing formula. To be deductible, a room used as a home office must be permanently dedicated as such. The square footage of that room as a percentage of the rest of the house determines the dollar amount of the deduction in rent, utilities, mortgage, and so on. The small-business lobby wants a standard home-office deduction of $2,500, figuring that more people will understand it and more of the tiniest businesses will actually be able to take advantage of it.

The Prospects: The Senate is not the kind of place that's hospitable to new ideas. Spittoons still grace the chamber, should any senator wish to gnaw on a bit of chaw, but senators are not permitted to use laptops on the floor. Give the Senate a session or two to chew over the idea of a simpler home-office deduction. Then maybe it will pass. The NFIB hopes that Representatives Mac Collins (R-Ga.) and Tom DeLay (R-Tex.), who have been supportive of this initiative in the past, will take the lead in this Congress.

Federal Prison Contracts

The Agenda: Under a mandatory-source regulation, the government is required by law to buy products or services from federal prisoners if available. But the NFIB hates chain gangs, or the modern-day equivalent thereof. It gripes that Federal Prison Industries, the federal government's prison-labor unit, unfairly undermines companies that would otherwise have a shot at doing the work. There's $560 million worth of contracts at stake here, and more than 20,000 inmate workers involved. The NFIB would like the mandatory-source requirement repealed.

The Prospects: Pretty good. This idea was poised to sail through Congress last year as part of the Department of Defense reauthorization, but House Armed Services Committee chairman Bob Stump (R-Ariz.) became ill and was replaced by Representative Duncan Hunter (R-Calif.), who opposes the measure. The bill went nowhere in the Senate, and Congress was ultimately unable to pass the reauthorization anyway. Look for supporters like Representative Pete Hoekstra (R-Mich.) to bring this one up as a freestanding bill, not subject to the fate of larger pieces of legislation.

Eamon Javers is a writer and editor based in Washington, D.C.


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