It has become a ritual during the State of the Union address each January: As President Obama talks about small business as “the foundation of our economy,” the cameras pan to Michelle Obama. Sitting nearby will be a smiling entrepreneur, chosen to illustrate the administration’s commitment to young companies. In 2009, the guest was the owner of a solar panel installation firm in Colorado. In 2010, it was the CEO of a chain of supermarkets. In 2011, there was Zachary Davis, who had launched an ice cream shop in California, thanks to the American Recovery and Reinvestment Act.
But even though Davis follows politics more closely than most entrepreneurs, he still works too many hours to pay much attention to Washington policy debates.
With business owners like Davis in mind, Inc. looked at the major policy issues affecting small-business owners in 2014--and whether real change has any chance of happening:
Nearly Done Deals
Legislation covering two key issues affecting smaller companies has already been signed into law. The catch: Important details remain unresolved.
The Affordable Care Act--a.k.a. Obamacare--became law in 2010. But it remains a kludge in progress: In April, the administration delayed until 2015 the rollout of the state-run exchanges that will allow employees a wider choice of coverage options, and in July it pushed back, also until 2015, the launch of the employer mandate (forcing businesses with 50 or more employees to buy coverage or pay a penalty). Republicans still talk of repealing it, and although that seems beyond unlikely, there are key details of the law that could change.
The second almost-done deal is the JOBS Act. The first piece of the law, which relaxes Depression-era rules that ban companies from advertising investment opportunities to the public, went into effect in September. The second piece, which allows companies to sell equity via crowdfunding, should be in place by late 2014. Issues remain, such as: What kind of disclosures must companies make to investors? Michael McGeary, political director at Engine, a tech advocacy group, says the JOBS Act “could be a real boon for young companies,” particularly those located outside VC-dense areas such as New York and Silicon Valley.
These Could Actually Happen (Someday)
In early 2013, there was hope Congress would make progress on two other issues that small-business owners care about: immigration and tax reform. Momentum disappeared as Congress became fixated on the debt ceiling and Obamacare. But odds are good that we will see new laws on each before this Congress checks out in early 2015.
Immigration reform would affect small-business owners in two ways. For the majority, the big concern is making it easier to verify a worker’s legal status. The Feds offer a voluntary online system called E Verify, and the immigration reform bill passed by the Senate last spring would make this system mandatory. That broad bill also would require noncitizen workers to show ID with fraud-resistant “biometric markers” when applying for jobs.
Other businesses--particularly in tech industries--care more about expanding the inflow of high-skill immigrants. These companies hope to see an expanded H-1B visa program, the creation of visas for immigrants who show proof of VC backing, and a clearer path to citizenship for high-skilled workers who are here illegally. Political oddsmakers are somewhat optimistic about reform passing in 2014, primarily because the 2013 Senate bill gained bipartisan backing before stalling out in the House.
Tax reform is another key 2014 issue. In late 2012, the Bush-era tax cuts expired, resulting in a tax increase (to 39.6 percent) on the highest earners. In August, Obama unveiled a plan to lower corporate tax rates from a maximum of 35 percent to 28 percent. This one-two punch seems unfair to small businesses, given that a filer’s rate could vary more than 10 percent depending on what kind of corporate structure he or she has chosen.
Senator Max Baucus and Representative David Camp, who lead their respective congressional committees on taxation issues, have been working on a bill that they say would be fairer to small businesses, but both men will be leaving those posts in early 2015, so it’s unclear how much success they will have.
There are perennial issues that small-business advocates love to promote and that members of Congress will periodically peddle--but never go anywhere. One example: The Kauffman Foundation has pushed to make it easier for students and professors to take innovations created inside universities and launch private companies. That’s a shift from the current system, in which agonizingly slow university bureaucracies must approve such deals. It sounds like a reasonable fix, but “universities hate the idea,” says Kauffman’s Dane Stangler. In July, House members discussed draft legislation aimed at providing grants to universities to promote innovative approaches to technology transfer. Similar legislation has been introduced, unsuccessfully, over the years.
Politicians also love to show love for small business by attempting to reduce regulation. Last summer, Senators Angus King and Roy Blunt tried with the Regulatory Improvement Act of 2013, which calls for a committee to come up with a plan to review, simplify, and cut federal regulations. Good luck. Why? What business owners see as “red tape” are often things that safety or environmental advocates see as needed protections.