Many small business people think the administration’s proposed new small business plan can jumpstart the economy and create jobs in the long term. But a lot of people believe the worst is not over for our economy in the short term.
Small business owners remain uncertain about the economy. The unemployment picture bodes poorly for the near future. There is no quick fix for jobs or the economy to turn around this year. Credit is tight, limiting job growth. The small business bill will take time to be effective. Most businesses are pursuing growth cautiously, as consumer demand remains low. Price pressures continue to erode profit margins, due to intense competition in many industries.
Yet, there are a lot of promising aspects to the proposed small business plan, if it were adopted. It is estimated the plan would offer $12 billion in business tax incentives. It would also contain about $30 billion for added stimulus monies to go to community banks, for them to lend to small businesses. Until now, commercial banks that got TARP funds invested mainly in bonds and treasuries that made profits for them, instead of making loans to small businesses.
The small business proposal includes incentives to cut health care costs for small businesses, by extending additional tax credits of up to 50 percent of the insurance premiums paid by employers. The pot may be sweetened by the elimination of capital gains taxes for start-up businesses, and incentives to support innovations and high tech jobs.
Proposals to encourage investments in women-owned small businesses are also included, such as set-aside subcontracts through large company federal contracts. The bill also will increase minority access to capital, as well as provide support for rural small businesses, especially for exporting agricultural products.
Many of the issues in the new small business proposal are similar to the issues, voted for by attendees, at all three White House Conferences on Small Business. Delegates to those conferences approved many of these same government efforts, although there were issues that did not turn out to be either adopted or performed successfully.
For example, the creation of a network of public-private business incubators in disadvantaged communities is not new. Business incubators already have been in operation in many communities, but expanding the opportunity to set them up is an idea that has much merit. Business incubators have experienced business counselors available for guidance, shared secretarial services, and low cost rental spaces to help new small businesses grow.
Another $50 billion in stimulus monies is being proposed in the small business bill, for infrastructure spending on new or improved bridges, roads and buildings. During the Great Depression of the 1930s, a similar effort got jobs moving ”“ and it might work again.
Now, let’s look at the timing for more jobs. There is a lot of uncertainty about jobs improving dramatically, in two to four years, as many experts predict, yet people need jobs right now. The government proposal offers hope for the future, but it will take time to implement.
Due to mid-term elections coming up, Congress and the White House are feeling pressure to extend the tax cuts for the middle class, up to $250,000 income. Some people would prefer to have all the tax cuts extended, encouraging people to better themselves in the good old American way, by hard work and upward mobility. Many small businesses will be taxed twice; once by their corporations being taxed on profits, and then the owners being taxed again on their incomes.
Just look at the regulations. Many federal agencies have not yet made or implemented regulations on laws passed in the last year. Businesses need to know what to expect of future regulations, which could result in more taxes or penalties. Many agencies do not have personnel with business backgrounds to understand unreasonable regulatory problems that affect small business. For example, new capital equipment investments with tax saving incentives may lead to more productivity, but not necessarily more jobs.
The strategies for this complex small business landscape are changing rapidly. Even on-line retailers face erosion of profits on sales, because of likely future taxes on interstate e-sales. As profits decline at all levels of the economy, jobs suffer and the possibility of a double dip recession may still occur.
Getting some of what business and consumers need is better than getting nothing. For the sake of the economy and future jobs, legislators should vote the small business plan into law, before the end of 2010.
— Bernard Featherman is a business columnist and past president of the Biddeford-Saco Chamber of Commerce. He can be reached by e-mail: bernard@featherman.com.
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