Small Businesses, the Economy, and Mid-term Elections
http://thedianerehmshow.org/shows/2010-10-14/small-businesses-economy-and-mid-term-elections
Small businesses are said to be the backbone of the U.S. economy, and if past is prologue, it is the growth of small businesses that will lead to new jobs. Most agree that Washington needs to do what it can to foster economic growth, but with midterm elections approaching there is a vigorous debate among candidates as to what sort of help is effective. A panel discusses what Washington can and can’t do to help small businesses grow.
Guests
Jacob Hacker
professor of political science, Yale University
Elizabeth Williamson
reporter, Wall Street Journal
Bill Rys
tax counsel, National Federation of Independent Business
Comments
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There are so many people who en-visualize small business as the mom and pop store but my guess is that it includes many medical and legal practices as well as manufacturing facilities worth millions. Can anyone specifically describe the criteria used to classify a small business? e.g. number of employees, gross receipts
Small Businesses don't exist in a vacuum. How much of "Small Business" work comes from Big Business or Government? Many small businesses in St. Louis are successful because they are subcontractors to Boeing. In addition, many retail small businesses benefit from Boeing employees, government employees, benefit recipients, etc., living and working in their communities. Peggy Kruse, St. Louis
I'd also like to know if "small business" is defined by number of employees or income? Are hedge fund companies included in the "small business" category? This week I read that hedge funds received net deposits in August of $11.3 billion...that's BILLION WITH A B! Yet, a couple of weeks ago on the CNBC Economic Forum, we heard hedge fund manager Anthony Scaramucci ask Obama why he was "treating Wall Street like a piñata!"
I have co owned a small business for 35 years. We have about 60 employees. We small business owners should be spending our time and effort serving our customers in the most efficient manner possible. We should NOT be spending our time figuring out how to qualify for some government program,handout, or tax credit. Small business people are naturally independent risk takers. We should be willing to take the risk and either reap the reward or suffer the consequences, go out of business, and work for someone else.
All of my customers now ONLY use temp services to hire new employees.
Do the unemployment numbers reflect these as new hires?
Diane stated that people are confused about the definition of small business. I don't think "people" are confused, but politicians try to play with the definition. I have friends and family that own small businesses and I think we all know someone who truly own small businesses. The problem is, I think, that politicians are gaming the system for the benefit of the wealthy. It's like having some rich guy talk you into sharing your cab to the airport, and when you get there he tosses a buck on the seat jumps out and leaves you with the rest of the fare.
I feel as if the focus has always been on small business and business in general. It has not been on the working person. The middle class is not just made up of small business owners. That is always the inference.
Small business has done a lot to reduce wages and reduce safety for the American worker and the public in general.
Personally, as a worker, I am tired of their whining. They write off much of their family expenses, cars, houses, equipment, services, etc. all at the expense of their employees because their profit is not shared. They chose to be "small" business people. To me, 500 people is not small business...and are those full time employees?
Re small business taxes:
Can't something be done with the tax code or IRS regulations to allow legitimate small business to avoid tax restoration while still taxing personal income above $250,000?
If one of the biggest obstacles for small businesses is implementing "good" policies put in place by the federal (such as the one that pertains to lead in children's toys), then what do your panelists think should be done to solve that problem? Not have policies to protect us and our children? Use federal money to help these businesses pay for implementation? What?
Where is there any discussion of corporate responsibility to their country in these hard times? Shouldn't corporations put patriotism ahead of profits in these hard times? Stop firing and start hiring to help. I join those who don't buy from corporations that keep firing. Their bottom line will be a backlash against their greed if they don't do their fair share to help.
I would like your panel to comment on the following: they mentioned this person from IL who owns a small business that produces school products for children who finds it too difficult to implement safety measures for his products; and, decided to raise money for the Republican Party's candidate who is against the measure that regulates the safety of this products. What about the consumers of this products? When we find led in children's products we all scream foul; however, we find that the regulations are too expensive. He should be innovative instead and find a cheaper way to assure his clients that his products are safe....
It doesn't matter whether it's big vs. small, that is an ideological fight and doesn't matter to most americans. Lately we've seen alot of Bad business at both ends of the spectrum, that is why we are having this recession. As a mother I want to have Good governance and Good business, consumers will start spending again when they have the money and they feel they can trust that companies aren't just selling "snake oil". I am tired of lead in toys, salmonella in peanut butter and eggs, and toxic assests in the stock market. Seriously, if you take care of your customers first they will stick with you no matter which way the economy or the tax laws go.
I can't believe that anyone is so gullible to believe that giving $ (through extending tax cuts) to the richest couple percent of Americans and to corporations who already at this point have large cash reserves will improve hiring.
Give me a break.
Republicans should be congratulated for their continued masterful ability as sellers of untruths.
As a small concrete replacement business (5 employee) in Canton Michigan, seasonal as it is, we have been in business 20 years and have survived by quality and equitable work standards through this recession. However, here is the reality: we have given our business more than 50,000.00 in officer loan, the past 5 years, have not received personal paychecks this season more than 12,000.00 and cannot obtain a loan to ease the burden. We generate more than 1/2 million in a season. The tax bracket cuts or increase are fairly insignificant now. If we can't tap into the 20 billion to ease our monthly expenses, the system will put us out of business. Know that we HAVE succeeded this season due to not paying SS portion of almost 10,000.00 from the President's relief fund. It does trickle down.
Dominic's Cement Works, Inc.
A very important consideration for being classified as a "Small Business" is the priority given that classification in Federal Government contracting.
No, they are not necessarily actually small, woman or minority owned, and they are not necessarily the most qualified to complete the task. But they configure themselves that way to qualify for lucrative contracts and deal with cost overruns later.
It is unfortunate for the taxpayer, but it is the way the the billion dollar game is played.
As a business owner I've already experienced the affects of tax increases and audits from the local governments finding ways to maintain their revenues. An additional increase from our federal gov't will burden our cash flow even further. Our government and the media need to realize most small and medium size business' net income is not cash sitting in the bank. This cash is tied up in inventory and receivables meaning we have to borrow even more money to pay our taxes from our lines of credit. for now, I won't go in to the potential delimas of our bank covenants we're required to meet with an increased cash flow going out instead of into our businesses ( like hiring employees and buying equipment). I will say for now we're extremely fortunate interest rates are low.
Pllease comment on and identify the toy distributer from IL who is not willing to have his toxic lead toys regulated by the government. The fact that he admits to supporting the Republican agenda to deregulate safety regulations is appalling. Toys "outsourced" by large corporations and unregulated are products I would never purchase!
In 1986, the desire of liberals to avoid rewarding high net worth small business owners meshed with the conservatives’ desire to allow small business owners to avoid corporate taxes altogether. The result was a greatly expanded opportunity for small businesses to become S corporations. The consequence was that the small businesses which remained C corporations were subject to a surtax. This 39% marginal rate on income between $100,000 and $335,000, the Nasty Notch, has the unintended consequences of not only discouraging C corporation formation, but also causing existing, small C corporations to switch to S corporations or LLCs. In so doing, small businesses have successfully avoided the corporate tax, but at the same time, they have avoided retaining the earnings critical to grow successful businesses.
Why does this matter? Recent small business distress shows the consequences of underfinanced small business.
The tax situation is backwards from what it should be to encourage small business growth. To encourage new C corporation formation, the corporate tax rate should be significantly below individual tax rates, up to perhaps one million dollars. Updating the 1980 recommendations to account for inflation and the change in individual rates could create the following corporate tax schedule.
15% up to $100,000, 20% from $100,000 to $200,000, 25% from $200,000 to $500,000, 30% from $500,000 to $1,000,000 and 34% above $1,000,000.
In concert with the changes in the corporate tax schedule listed above, Congress could consider giving an immediate economic boost to these small businesses by allowing small businesses to elect to be taxed as C corporations from now until April 15, 2011. This liberalized election would give immediate tax relief and extra cash to small businesses at a time when small business needs this incentive.
In 1986, the desire of liberals to avoid rewarding high net worth small business owners meshed with the conservatives’ desire to allow small business owners to avoid corporate taxes altogether. The result was a greatly expanded opportunity for small businesses to become S corporations. The consequence was that the small businesses which remained C corporations were subject to a surtax. This 39% marginal rate on income between $100,000 and $335,000, the Nasty Notch, has the unintended consequences of not only discouraging C corporation formation, but also causing existing, small C corporations to switch to S corporations or LLCs. In so doing, small businesses have successfully avoided the corporate tax, but at the same time, they have avoided retaining the earnings critical to grow successful businesses.
Why does this matter? Recent small business distress shows the consequences of underfinanced small business.
The tax situation is backwards from what it should be to encourage small business growth. To encourage new C corporation formation, the corporate tax rate should be significantly below individual tax rates, up to perhaps one million dollars. Updating the 1980 recommendations to account for inflation and the change in individual rates could create the following corporate tax schedule.
15% up to $100,000, 20% from $100,000 to $200,000, 25% from $200,000 to $500,000, 30% from $500,000 to $1,000,000 and 34% above $1,000,000.
In concert with the changes in the corporate tax schedule listed above, Congress could consider giving an immediate economic boost to these small businesses by allowing small businesses to elect to be taxed as C corporations from now until April 15, 2011. This liberalized election would give immediate tax relief and extra cash to small businesses at a time when small business needs this incentive.
Fully agree about focus...
Everyone talks about small business persons worrying that the rules are going to change, or that taxes will go up, etc.- - but no one mentions that their employees are worried about the same things. Their boss' decisions affect their lives, and on top of that, they also worry about if their job is going to be outsourced, if they'll be laid off, which leads to worries about the rent, how they'll eat, etc.
Who's out there caring about small business employees?
Diane, my friend, your voice sounded so good, and you were are the zenith of your common sense intellectuality. At five minutes before the hour you asked the panel and audience the key question of the day: Why does our Congress persist in the moushy definition of small business, and of many other things?
You stayed within your assigned role, allowing the commentators and callers to express the consensus that ours is a "winner take all" economy where even the well-capitalized and well-organized mid-sized business has a difficult time succeeding, and that the recent legislated incentives will have little effect beyond rewarding the few winners.
What was not brought out is how polarized assets (income and wealth) are, and how fast this imbalance is intensifying. There is no way any semblance of a self-regulating market or of a democratic republic can be maintained under this glaring inequity. And it is the inequity of power that results preventing any relief or reform. Somehow the United States must go outside standard operating procedure (beyond sacred great property and irresistible elite contract) to reset and correct our situation, or risk losing prosperity all together. "America" remains a wealthy nation, but the operating assets are in too few hands.
EDMuser: Yes sir, temporary positions are included in all those "created jobs." The definition of employment is based on whether the individual works a certain number of hours in a week or month, and does not consider the security of the position or eligibility for unemployment benefits when the gig ends. A minimum wage job counts the same as a Wall Street job in these statistics. So, if this bubble begins to deflate, it could go down pretty fast. Anyway, incomes are still falling, except for the top ten percentile.
SteveMarg: It is the design of legislation (and precise tweaking) providing the opportunity for certain selected categories and parties to exercise their "gaming of the system." Byzantine bills written in secret and passed under rules suspension keep us from knowing what we are getting (Beneficiaries write the bills.). Maybe that's why we call this collusion and corruption (bribery and bought elections) a "system." So-called bi-partisanship tends to combine the worst choices and produce contradictions. And then there are the unenforced regulations (revolving door bureaucracy), and the needed laws that can never pass (obstruction by bought advocates). The big picture is too ugly and scary for most people to look at.
drshow producers: Please consider having retired Justice Sandra Day O'Connor as Diane's guest. I believe her expressed concern about judicial electioneering may be a surrogate issue highlighting the subtle undermining of Supreme Court integrity, a condition that may have played a part in her early retirement. That makes it vitally important that the public hear from her again.
On a more personal level, she and Diane both have ailing husbands and are advocates for caregivers: a wonderful second area of discussion, and they are both energetic and active, self-educating seniors. Wouldn't that be appealing?