The U.S. House will vote on a bundle of capital formation bills on March 8, which includes the crowdfunding measure long supported by the White House. This package is expected to handily advance as it has wide bipartisan appeal, and several of the measures have already passed the House with large bipartisan majorities. In the next several weeks, the House will move to tax issues where it will focus on a major tax relief initiative for small businesses.
The proposal calls for a 20 percent tax cut for small businesses that employ fewer than 500 people. As Majority Leader Eric Cantor (R-VA) announced earlier in the year, "Our pro-growth proposal will provide every small business that employs fewer than 500 people with a 20 percent deduction, helping them retain and create new jobs. I hope every Democrat will join us in passing the small business tax cut by April 15."
Such a tax cut will free up resources for small business owners, which they can invest in their businesses and hire needed employees. With health coverage, energy and other costs on the rise, small business owners and getting squeezed. The business environment remains challenging and accessing capital is difficult. Indeed, with President Obama proposing a major (and SBE Council would argue needed) tax cut for corporations, small businesses also need tax relief. SBE Council looks forward to House action on this tax proposal.
Karen Kerrigan, President & CEO
Showing posts with label farmer and president Obama. Show all posts
Showing posts with label farmer and president Obama. Show all posts
Wednesday, March 07, 2012
Tuesday, March 06, 2012
House Expected to Vote on Package of Capital Formation Bills This Week
GOP leaders introduced the Jumpstart Our Business Startups Act (JOBS Act) on February 28-- a package of bipartisan bills that will encourage capital formation, and help businesses grow. Several of these bills - which are strongly supported by SBE Council -- have previously advanced in the House on a bipartisan basis. President Obama signaled his support for the initiative. SBE Council is confident these bills will advance in the House, and remains optimistic that the Senate will take action as well. Senate Majority Leader Harry Reid (D-NV) announced that the Senate will move forward on these capital access bills, and the Senate Banking Committee is hosting a hearing on March 7.
As SBE Council President & CEO Karen Kerrigan noted in a recent Politico.com article regarding Reid's announcement to move on the bills, "Access to capital continues to be a major struggle for small businesses and entrepreneurs. It is a no-brainer for the Senate to move forward with this package of capital formation bills."
The JOBS Act -- which includes provisions to modernizes existing regulations, update thresholds or provide compliance relief - is bundling the following provisions:
(The following information is provided by Majority Leader Eric Cantor, R-VA)
REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES ACT (H.R. 3606): Approved by Financial Services Committee 54-1
H.R. 3606 reduces the costs of going public by providing companies with a temporary reprieve from Securities and Exchange Commission (SEC) regulations by phasing in certain regulations over a five-year period. The bill creates a new category of issuers called an "Emerging Growth Company" (EGC), which would retain its status for five years or until it exceeds $1 billion in annual gross revenue or becomes a large accelerated filer. H.R. 3606 ensures investors are protected by requiring the EGCs to provide audited financial statements as well as establishing and maintaining internal controls over financial reporting.
THE ACCESS TO CAPITAL FOR JOB CREATORS ACT, H.R. 2940: Approved by the House 413-11
H.R. 2940 removes an SEC regulatory ban preventing small businesses from using advertisements to solicit investors. H.R. 2940 allows small companies offering securities under Regulation D to utilize advertisements or solicitation to reach investors and obtain capital. The SEC's ban on solicitation, first adopted in 1982, limits the pool of potential investors and severely hampers the ability of small companies to raise capital and create jobs.
THE ENTREPRENEUR ACCESS TO CAPITAL ACT, H.R. 2930: Approved by the House 407-17
H.R. 2930 removes SEC restrictions that prevent "crowdfund investing" so entrepreneurs can raise equity capital from a large pool of small investors who may or may not be considered "accredited" by the SEC. H.R. 2930 allows companies to pool up to $1 million from investors without registering with the SEC, or up to $2 million if the company provides investors with audited financial statements. Individual contributions are limited to $10,000 or 10 percent of the investor's annual income, whichever is less.
THE SMALL COMPANY CAPITAL FORMATION ACT, H.R. 1070: Approved by the House 421-1
H.R. 1070 makes it easier for small businesses to go public by increasing the offering threshold for companies exempted from SEC registration from $5 million to $50 million. The SEC has the authority to raise this threshold but has not done so for almost two decades. Amending Regulation A to make it a viable channel for small companies to access capital will permit greater investment in these companies, resulting in economic growth and jobs.
THE PRIVATE COMPANY FLEXIBILITY AND GROWTH ACT, H.R. 2167: Approved by Financial Services Committee Voice Vote
H.R. 2167 removes barriers to capital formation for small companies by raising the shareholder registration requirement threshold from 500 to 1,000 shareholders. Many small businesses are forced to file as a public company because of an obscure regulation that requires companies with 499 shareholders and $10 million in assets to file with the SEC. This current shareholder threshold rule was originally adopted in 1964 and has not been modernized since. This regulation restricts the number of shareholders and assets these companies can have. In turn, this severely limits the growth stages for companies, which need time and flexibility to develop.
THE CAPITAL EXPANSION ACT, H.R. 4088: House Version of S. 1941, Referred to Financial Services Committee
H.R. 4088 increases the number of shareholders permitted to invest in a community bank from 500 to 2,000. This bill would enable banks to better deploy their capital to make loans and create jobs rather than comply with burdensome SEC requirements.
It looks like the House will vote on the JOBS Act on March 8, and SBE Council will KEY VOTE this important legislation, as a vote for small business, in its Ratings of the 112 Congress.
Karen Kerrigan, President & CEO
As SBE Council President & CEO Karen Kerrigan noted in a recent Politico.com article regarding Reid's announcement to move on the bills, "Access to capital continues to be a major struggle for small businesses and entrepreneurs. It is a no-brainer for the Senate to move forward with this package of capital formation bills."
The JOBS Act -- which includes provisions to modernizes existing regulations, update thresholds or provide compliance relief - is bundling the following provisions:
(The following information is provided by Majority Leader Eric Cantor, R-VA)
REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES ACT (H.R. 3606): Approved by Financial Services Committee 54-1
H.R. 3606 reduces the costs of going public by providing companies with a temporary reprieve from Securities and Exchange Commission (SEC) regulations by phasing in certain regulations over a five-year period. The bill creates a new category of issuers called an "Emerging Growth Company" (EGC), which would retain its status for five years or until it exceeds $1 billion in annual gross revenue or becomes a large accelerated filer. H.R. 3606 ensures investors are protected by requiring the EGCs to provide audited financial statements as well as establishing and maintaining internal controls over financial reporting.
THE ACCESS TO CAPITAL FOR JOB CREATORS ACT, H.R. 2940: Approved by the House 413-11
H.R. 2940 removes an SEC regulatory ban preventing small businesses from using advertisements to solicit investors. H.R. 2940 allows small companies offering securities under Regulation D to utilize advertisements or solicitation to reach investors and obtain capital. The SEC's ban on solicitation, first adopted in 1982, limits the pool of potential investors and severely hampers the ability of small companies to raise capital and create jobs.
THE ENTREPRENEUR ACCESS TO CAPITAL ACT, H.R. 2930: Approved by the House 407-17
H.R. 2930 removes SEC restrictions that prevent "crowdfund investing" so entrepreneurs can raise equity capital from a large pool of small investors who may or may not be considered "accredited" by the SEC. H.R. 2930 allows companies to pool up to $1 million from investors without registering with the SEC, or up to $2 million if the company provides investors with audited financial statements. Individual contributions are limited to $10,000 or 10 percent of the investor's annual income, whichever is less.
THE SMALL COMPANY CAPITAL FORMATION ACT, H.R. 1070: Approved by the House 421-1
H.R. 1070 makes it easier for small businesses to go public by increasing the offering threshold for companies exempted from SEC registration from $5 million to $50 million. The SEC has the authority to raise this threshold but has not done so for almost two decades. Amending Regulation A to make it a viable channel for small companies to access capital will permit greater investment in these companies, resulting in economic growth and jobs.
THE PRIVATE COMPANY FLEXIBILITY AND GROWTH ACT, H.R. 2167: Approved by Financial Services Committee Voice Vote
H.R. 2167 removes barriers to capital formation for small companies by raising the shareholder registration requirement threshold from 500 to 1,000 shareholders. Many small businesses are forced to file as a public company because of an obscure regulation that requires companies with 499 shareholders and $10 million in assets to file with the SEC. This current shareholder threshold rule was originally adopted in 1964 and has not been modernized since. This regulation restricts the number of shareholders and assets these companies can have. In turn, this severely limits the growth stages for companies, which need time and flexibility to develop.
THE CAPITAL EXPANSION ACT, H.R. 4088: House Version of S. 1941, Referred to Financial Services Committee
H.R. 4088 increases the number of shareholders permitted to invest in a community bank from 500 to 2,000. This bill would enable banks to better deploy their capital to make loans and create jobs rather than comply with burdensome SEC requirements.
It looks like the House will vote on the JOBS Act on March 8, and SBE Council will KEY VOTE this important legislation, as a vote for small business, in its Ratings of the 112 Congress.
Karen Kerrigan, President & CEO
Thursday, December 29, 2011
Top Policy Developments for Small Business in 2011
The past year was a rollercoaster ride when it came to the economy and government policies. While entrepreneurs can claim some policy victories in 2011, Washington came up woefully short on the types of policies needed to boost business confidence and strong economic growth. Unfortunately, it looks like similar conditions will prevail in 2012.
Here are the policy developments -- the good, the bad, the ugly and the unfinished -- that in big ways and small will continue to impact business conditions and confidence in 2012. SBE Council's "Top Policy Highlights and Lowlights for Small Business in 2011" include:
Burdensome 1099 Reporting Requirement in ObamaCare Repealed. One of the many misguided provisions included within the "Patient Protection and Affordable Care Act" was a mandate requiring small business owners to file a 1099-MISC to the Internal Revenue Service (IRS) for all payments made to vendors totaling $600 or more in a tax year. This also meant that they would have to collect W-9 information from every vendor they purchase more than $600 worth of goods or services from each year. This unreasonable reporting mandate would have vastly increased costs and the paperwork burden on small business owners. On April 14, President Obama signed H.R. 4, the "Small Business Paperwork Elimination Act," which repealed the 1099 mandate.
3% Withholding Tax Mandate Repealed. Since its inclusion as a "pay for" in the "Tax Increase Prevention and Reconciliation Act of 2005," SBE Council and other business groups warned about the costly and unintended consequences of the 3% withholding mandate on government contractors. Set to kick in January 1, 2013, SBE Council argued that new government and private sector costs associated with the mandate would far exceed anticipated revenue gains. Small firms would become less able to compete for government contracts due to new cash flow constraints and costs spawned by the mandate, and taxpayer costs would also increase. Repeal legislation (H.R. 674) passed the House and Senate unanimously, and the President signed the bill into law on November 21.
U.S. Supreme Court to Consider Constitutionality of Individual Mandate in ObamaCare. On November 14, the U.S. Supreme Court granted certiorari to hear arguments regarding the constitutionality of several aspects of the "Patient Protection and Affordable Care Act" (PPACA). America's largest bloc of small business owners - the 14.5 million self-employed - has an immense stake in the outcome of the Court's decision regarding the constitutionality of the individual mandate in PPACA. The mandate requires that individuals purchase a government-approved health insurance plan, or pay a tax if they refuse to buy coverage or cannot afford it. The court will hear five hours of arguments on several partitions: whether Congress exceeded its authority under Article I of the Constitution in passing the individual mandate; whether the suits challenging the new law should be barred by the Anti-Injunction Act; whether the individual mandate can be severed from the rest of the law; and the federalism issue as it pertains to Medicaid expansion in PPACA. Already, the number of self-employed Americans is dramatically decreasing due to policy uncertainties on tax, health care and other issues, as well as a general lack of confidence in the future of the U.S. economy. SBE Council agrees that individuals should not be forced by the federal government to buy a product or service. Oral arguments are expected to begin this March.
Small Business Health Care Tax Credit is a Flop. ObamaCare supporters touted the inclusion of the small business health care tax credit in PPACA as an argument for advancing the legislation. They continued to hype the tax credit well after passage even though SBE Council communicated it would not work. The tax credit is not robust enough, is too restrictive in its eligibility criteria, and it is temporary. It has little practical utility for most small businesses, and this was confirmed by the June 2011 results of an "Economy and Entrepreneurs Outlook Survey" released by SBE Council. Overall, only 7 percent of small businesses said they used the new small business health care tax credit. A November 15 House Ways and Means hearing uncovered similar findings. A U.S. Treasury Department Inspector General report found that of mid-October 2011, only 309,000 small business taxpayers had claimed the credit. The IRS had earlier communicated that 4.4 million taxpayers would be eligible. The good news is that the total payout for the credit was $416 million, while the CBO estimated that $2 billion would be paid out in 2010 alone - so PPACA is under budget! The bad news is that many small business owners have no effective tool to help them deal with ever-increasing health coverage costs, and many owners and their employees remain uninsured due to the high costs of insurance. With the passage of PPACA nothing much has changed for small business, except for higher costs and more uncertainty, which means "affordable health coverage" and ObamaCare is set to be a major campaign issue in 2012.
States Cut Taxes More than They Increased Them. According to the National Council of State Legislatures (NCSL), for the first time in ten years states experienced a net state tax reduction. While the NCSL reports that we should not draw "hasty conclusions" from this data being the aggregate cut came from a handful of larger states cutting and raising taxes, SBE Council believes the overall trend is generally a good one. Most state officials have come to understand that a low tax environment is critical to attracting businesses and investment, which is a great trend for entrepreneurs.
Tax Uncertainty Embedded for 2012. Small business owners and entrepreneurs hoping for clarity on federal taxes in 2012 will be disappointed. The year ended with a minor skirmish over extending the payroll tax holiday and unemployment benefits for two months. Businesses preferred some certainty with a one-year extension of the payroll tax cut. But now Congress will be back fighting over how to pay for (read: proposed tax increases on small business owners and investors) a full-year extension as soon as they return in January. Moreover, Congress left town without extending the R&D tax credit, the AMT patch, the state and local sales tax deduction and a host of other provisions expiring on December 31, 2011. Meanwhile, Section 179 expensing drops to $125,000 from $500,000 in 2012, and falls to $25,000 in 2013. Adding more uncertainty in the mix is the December 31, 2012 expiration of lower individual tax rates, capital gains and dividend taxes and the whole host of tax cuts and credits that were included in the 2001,2003 and 2006 tax cut packages. Looks like 2012 will be a rewrite of 2011 - that is, along with the weak economy, tax policy uncertainties will continue to drag small business confidence down.
Access to Capital Bills Reforming Outdated SEC Rules Sweep Through the U.S. House. Access to capital remains a key challenge for entrepreneurs. Costly regulations from Dodd-Frank and economic uncertainty are making it increasingly difficult to secure capital or raise funds to support business growth and investment. By a vote of 407-17 on November 3, legislation passed the House (H.R. 2930, the "Entrepreneurs Access to Capital Act") that would modernize outdated Securities and Exchange Commission (SEC) rules to allow for crowd fund investing. President Obama supported the legislation. This approach is being used with great success in other parts of the world, and the gift-based platforms in the U.S. (Kick Starter, Kiva and many other sites) prove their workability. Crowdfund investing would provide entrepreneurs access to sources of capital they currently cannot tap into without triggering complex SEC rules. The U.S. Senate is considering two bills (S.1791 and S. 1970), but with distinct approaches to allow for crowdfund investing. The former is more workable than the latter. Also on November 3, H.R. 2940, the "Access to Capital for Job Creators Act" passed by a vote of 263-112, which would also widen the universe of potential investors for small businesses allowed under the Securities Act of 1933 without subjecting these businesses to the onerous costs of registration with the SEC. This bill has been introduced in the Senate (S.1831). Strong bipartisan support for these bills in 2011 sets the stage for action in 2012.
New Trade Agreements Penned with Panama, Columbia and South Korea. Small and mid-size U.S. businesses overwhelmingly dominate the trade landscape, but the U.S. has dramatically slowed its work in cutting new trade agreements. Our major international competitors have outpaced the U.S. with regard to signing new trade accords, putting U.S. businesses at a competitive disadvantage across the globe. On October 21, President Obama finally signed trade agreements with Panama, Columbia and South Korea, which have been in the works for many years. The accords will eliminate tariffs on most U.S. exports to these countries and open service markets to American businesses. It is expected that U.S. exports will increase by $11 billion as a result of the South Korea pact alone. These agreements also include strong IP protections for American businesses. Increasingly, U.S. entrepreneurs are looking overseas for growth opportunities. A survey released by the Financial Services Forum and SBE Council in November 2011 found that 21 percent of small businesses will pursue overseas expansion as part of their growth strategy for the next five years. The signing of these three trade accords should fuel momentum for finalizing other important agreements that will open new markets for U.S. good and services, benefitting small businesses and their workers alike.
America Invents Act Signed into Law: Long Overdue Patent Reform Helps U.S. Entrepreneurs. President Obama signed the Leahy-Smith "America Invents Act" (H.R. 1249) into law on September 16. This important legislation updates the U.S. patent system, bringing certainty, simplicity and savings to U.S. entrepreneurs. Strong IP protection is critical for small business looking to effectively expand and attract investment. The new law effectively enables such protection by modernizing key aspects of the patent process, aligning the U.S. system to the rest of the world. The first-inventor-to-file approach will reduce legal costs and improve transparency. The fast-track examination cuts costs in half for small businesses, and other fee reductions are available for qualifying small firms. Implementation of the law's provisions will bring the U.S. patent system into the 21st century, help spur American innovation and improve U.S. competitiveness. As a side note, the U.S. Patent and Trademark Office awarded patent number 8 million to a California-based small business on September 8. Second Sight Medical Products, a firm with 85 employees, received the patent for a "visual prosthesis apparatus."
The Debt Ceiling and Failure of the "Super Committee." For the first time in history, Congress tied conditions for allowing an increase in the debt ceiling. SBE Council agreed that it was a good thing to tie spending reductions to a rise in the debt ceiling, and Congress assigned a "super committee" to address the challenge. But the committee could not reach an agreement, which means automatic spending cuts will occur with the 2013 budget. Small business owners have a major stake in getting the nation's fiscal mess in order. The future of entrepreneurship, robust economic growth, tax rates and access to affordable capital all rest on getting spending and debt under control. Out-of-control spending will continue to consume more and more private sector resources suffocating growth, pushing capital abroad and killing U.S. competitiveness. According to the Financial Services Forum and SBE Council survey noted above, small business owners said the number one thing Washington could do to help the economy was to develop a credible plan to get the nation's fiscal situation under control. The failure of the super committee, the lack of leadership from the White House in supporting even certain elements of the Bowles-Simpson plan, and the fact that the Senate has not passed a budget in over 900 days will continue to drive uncertainty casting a long shadow over the economy. Such conditions will continue to hurt small business in 2012 and in the mid-term.
Decision Time for President Obama on Keystone XL. The rise in fuel prices has had a significant impact on small businesses. In a June 2011 "Entrepreneurs and Economy Survey" released by SBE Council 74 percent of small business owners reported that higher prices were having an impact on their firms -- 41 percent raised their prices because of high prices, 26 percent had to cut employees or their hours worked, and 47 percent said higher prices were affecting their plans to hire. A staggering 38 percent of small business owners said if gas prices remain high or increase further their business will not survive. Fuel prices are on the rise again, and with instability mounting in the Mideast along with Iran threatening to close off the Strait of Hormuz, the U.S. needs to get serious about domestic production. The payroll tax extension bill agreed to by Congress includes a provision allowing the Keystone XL project to move forward (except in Nebraska) unless the president determines within 60 days of enactment that the project is not in the national interest. Even without threatening rhetoric from Iran - or if fuel prices were lower - this project should have been approved. More than three years worth of risk assessment has already been conducted, and numerous government agencies have affirmed that the pipeline poses no significant environmental risk. The $13 billion project would create more than 13,000 construction jobs, 7,000 manufacturing jobs, and more importantly a stable and secure supply of oil for the U.S. That means more affordable energy for small businesses.
What happened to Broadband for Everyone? Unfortunately, many small business owners and individuals are still without broadband access. That means their economic opportunities are limited. The Federal Communications Commission (FCC) issued a National Broadband Plan in March of 2010, and as recently as April 2011 said that increasing broadband deployment "is one of the great infrastructure challenges of our time." Unfortunately, the federal government and FCC continue to stymie private sector initiatives that would accelerate broadband deployment and keep investment flowing into wireless technologies. For one, the FCC's unprecedented bias and backward view of competition in reviewing the AT&T/T-Mobile merger (and the DoJ's decision to sue to stop the deal) killed an important development that would have brought high speed wireless access to many areas of the country. Despite overwhelming support from unions, entrepreneurs, politicians from all levels of government and the technology sector, the FCC listened to hard leftists, proving it does not grasp how markets and business work. On September 23, the FCC also moved forward with "net neutrality" regulations, even though it lacks the authority to regulate broadband markets. This regulatory overreach and the uncertainty that comes with it serve as real disincentives for investing in broadband innovations and service. That is bad news for small businesses that have benefited so much from the expansion of and innovations in broadband networks as consumers, content providers and telecommunications players.
Karen Kerrigan, President & CEO
Here are the policy developments -- the good, the bad, the ugly and the unfinished -- that in big ways and small will continue to impact business conditions and confidence in 2012. SBE Council's "Top Policy Highlights and Lowlights for Small Business in 2011" include:
Burdensome 1099 Reporting Requirement in ObamaCare Repealed. One of the many misguided provisions included within the "Patient Protection and Affordable Care Act" was a mandate requiring small business owners to file a 1099-MISC to the Internal Revenue Service (IRS) for all payments made to vendors totaling $600 or more in a tax year. This also meant that they would have to collect W-9 information from every vendor they purchase more than $600 worth of goods or services from each year. This unreasonable reporting mandate would have vastly increased costs and the paperwork burden on small business owners. On April 14, President Obama signed H.R. 4, the "Small Business Paperwork Elimination Act," which repealed the 1099 mandate.
3% Withholding Tax Mandate Repealed. Since its inclusion as a "pay for" in the "Tax Increase Prevention and Reconciliation Act of 2005," SBE Council and other business groups warned about the costly and unintended consequences of the 3% withholding mandate on government contractors. Set to kick in January 1, 2013, SBE Council argued that new government and private sector costs associated with the mandate would far exceed anticipated revenue gains. Small firms would become less able to compete for government contracts due to new cash flow constraints and costs spawned by the mandate, and taxpayer costs would also increase. Repeal legislation (H.R. 674) passed the House and Senate unanimously, and the President signed the bill into law on November 21.
U.S. Supreme Court to Consider Constitutionality of Individual Mandate in ObamaCare. On November 14, the U.S. Supreme Court granted certiorari to hear arguments regarding the constitutionality of several aspects of the "Patient Protection and Affordable Care Act" (PPACA). America's largest bloc of small business owners - the 14.5 million self-employed - has an immense stake in the outcome of the Court's decision regarding the constitutionality of the individual mandate in PPACA. The mandate requires that individuals purchase a government-approved health insurance plan, or pay a tax if they refuse to buy coverage or cannot afford it. The court will hear five hours of arguments on several partitions: whether Congress exceeded its authority under Article I of the Constitution in passing the individual mandate; whether the suits challenging the new law should be barred by the Anti-Injunction Act; whether the individual mandate can be severed from the rest of the law; and the federalism issue as it pertains to Medicaid expansion in PPACA. Already, the number of self-employed Americans is dramatically decreasing due to policy uncertainties on tax, health care and other issues, as well as a general lack of confidence in the future of the U.S. economy. SBE Council agrees that individuals should not be forced by the federal government to buy a product or service. Oral arguments are expected to begin this March.
Small Business Health Care Tax Credit is a Flop. ObamaCare supporters touted the inclusion of the small business health care tax credit in PPACA as an argument for advancing the legislation. They continued to hype the tax credit well after passage even though SBE Council communicated it would not work. The tax credit is not robust enough, is too restrictive in its eligibility criteria, and it is temporary. It has little practical utility for most small businesses, and this was confirmed by the June 2011 results of an "Economy and Entrepreneurs Outlook Survey" released by SBE Council. Overall, only 7 percent of small businesses said they used the new small business health care tax credit. A November 15 House Ways and Means hearing uncovered similar findings. A U.S. Treasury Department Inspector General report found that of mid-October 2011, only 309,000 small business taxpayers had claimed the credit. The IRS had earlier communicated that 4.4 million taxpayers would be eligible. The good news is that the total payout for the credit was $416 million, while the CBO estimated that $2 billion would be paid out in 2010 alone - so PPACA is under budget! The bad news is that many small business owners have no effective tool to help them deal with ever-increasing health coverage costs, and many owners and their employees remain uninsured due to the high costs of insurance. With the passage of PPACA nothing much has changed for small business, except for higher costs and more uncertainty, which means "affordable health coverage" and ObamaCare is set to be a major campaign issue in 2012.
States Cut Taxes More than They Increased Them. According to the National Council of State Legislatures (NCSL), for the first time in ten years states experienced a net state tax reduction. While the NCSL reports that we should not draw "hasty conclusions" from this data being the aggregate cut came from a handful of larger states cutting and raising taxes, SBE Council believes the overall trend is generally a good one. Most state officials have come to understand that a low tax environment is critical to attracting businesses and investment, which is a great trend for entrepreneurs.
Tax Uncertainty Embedded for 2012. Small business owners and entrepreneurs hoping for clarity on federal taxes in 2012 will be disappointed. The year ended with a minor skirmish over extending the payroll tax holiday and unemployment benefits for two months. Businesses preferred some certainty with a one-year extension of the payroll tax cut. But now Congress will be back fighting over how to pay for (read: proposed tax increases on small business owners and investors) a full-year extension as soon as they return in January. Moreover, Congress left town without extending the R&D tax credit, the AMT patch, the state and local sales tax deduction and a host of other provisions expiring on December 31, 2011. Meanwhile, Section 179 expensing drops to $125,000 from $500,000 in 2012, and falls to $25,000 in 2013. Adding more uncertainty in the mix is the December 31, 2012 expiration of lower individual tax rates, capital gains and dividend taxes and the whole host of tax cuts and credits that were included in the 2001,2003 and 2006 tax cut packages. Looks like 2012 will be a rewrite of 2011 - that is, along with the weak economy, tax policy uncertainties will continue to drag small business confidence down.
Access to Capital Bills Reforming Outdated SEC Rules Sweep Through the U.S. House. Access to capital remains a key challenge for entrepreneurs. Costly regulations from Dodd-Frank and economic uncertainty are making it increasingly difficult to secure capital or raise funds to support business growth and investment. By a vote of 407-17 on November 3, legislation passed the House (H.R. 2930, the "Entrepreneurs Access to Capital Act") that would modernize outdated Securities and Exchange Commission (SEC) rules to allow for crowd fund investing. President Obama supported the legislation. This approach is being used with great success in other parts of the world, and the gift-based platforms in the U.S. (Kick Starter, Kiva and many other sites) prove their workability. Crowdfund investing would provide entrepreneurs access to sources of capital they currently cannot tap into without triggering complex SEC rules. The U.S. Senate is considering two bills (S.1791 and S. 1970), but with distinct approaches to allow for crowdfund investing. The former is more workable than the latter. Also on November 3, H.R. 2940, the "Access to Capital for Job Creators Act" passed by a vote of 263-112, which would also widen the universe of potential investors for small businesses allowed under the Securities Act of 1933 without subjecting these businesses to the onerous costs of registration with the SEC. This bill has been introduced in the Senate (S.1831). Strong bipartisan support for these bills in 2011 sets the stage for action in 2012.
New Trade Agreements Penned with Panama, Columbia and South Korea. Small and mid-size U.S. businesses overwhelmingly dominate the trade landscape, but the U.S. has dramatically slowed its work in cutting new trade agreements. Our major international competitors have outpaced the U.S. with regard to signing new trade accords, putting U.S. businesses at a competitive disadvantage across the globe. On October 21, President Obama finally signed trade agreements with Panama, Columbia and South Korea, which have been in the works for many years. The accords will eliminate tariffs on most U.S. exports to these countries and open service markets to American businesses. It is expected that U.S. exports will increase by $11 billion as a result of the South Korea pact alone. These agreements also include strong IP protections for American businesses. Increasingly, U.S. entrepreneurs are looking overseas for growth opportunities. A survey released by the Financial Services Forum and SBE Council in November 2011 found that 21 percent of small businesses will pursue overseas expansion as part of their growth strategy for the next five years. The signing of these three trade accords should fuel momentum for finalizing other important agreements that will open new markets for U.S. good and services, benefitting small businesses and their workers alike.
America Invents Act Signed into Law: Long Overdue Patent Reform Helps U.S. Entrepreneurs. President Obama signed the Leahy-Smith "America Invents Act" (H.R. 1249) into law on September 16. This important legislation updates the U.S. patent system, bringing certainty, simplicity and savings to U.S. entrepreneurs. Strong IP protection is critical for small business looking to effectively expand and attract investment. The new law effectively enables such protection by modernizing key aspects of the patent process, aligning the U.S. system to the rest of the world. The first-inventor-to-file approach will reduce legal costs and improve transparency. The fast-track examination cuts costs in half for small businesses, and other fee reductions are available for qualifying small firms. Implementation of the law's provisions will bring the U.S. patent system into the 21st century, help spur American innovation and improve U.S. competitiveness. As a side note, the U.S. Patent and Trademark Office awarded patent number 8 million to a California-based small business on September 8. Second Sight Medical Products, a firm with 85 employees, received the patent for a "visual prosthesis apparatus."
The Debt Ceiling and Failure of the "Super Committee." For the first time in history, Congress tied conditions for allowing an increase in the debt ceiling. SBE Council agreed that it was a good thing to tie spending reductions to a rise in the debt ceiling, and Congress assigned a "super committee" to address the challenge. But the committee could not reach an agreement, which means automatic spending cuts will occur with the 2013 budget. Small business owners have a major stake in getting the nation's fiscal mess in order. The future of entrepreneurship, robust economic growth, tax rates and access to affordable capital all rest on getting spending and debt under control. Out-of-control spending will continue to consume more and more private sector resources suffocating growth, pushing capital abroad and killing U.S. competitiveness. According to the Financial Services Forum and SBE Council survey noted above, small business owners said the number one thing Washington could do to help the economy was to develop a credible plan to get the nation's fiscal situation under control. The failure of the super committee, the lack of leadership from the White House in supporting even certain elements of the Bowles-Simpson plan, and the fact that the Senate has not passed a budget in over 900 days will continue to drive uncertainty casting a long shadow over the economy. Such conditions will continue to hurt small business in 2012 and in the mid-term.
Decision Time for President Obama on Keystone XL. The rise in fuel prices has had a significant impact on small businesses. In a June 2011 "Entrepreneurs and Economy Survey" released by SBE Council 74 percent of small business owners reported that higher prices were having an impact on their firms -- 41 percent raised their prices because of high prices, 26 percent had to cut employees or their hours worked, and 47 percent said higher prices were affecting their plans to hire. A staggering 38 percent of small business owners said if gas prices remain high or increase further their business will not survive. Fuel prices are on the rise again, and with instability mounting in the Mideast along with Iran threatening to close off the Strait of Hormuz, the U.S. needs to get serious about domestic production. The payroll tax extension bill agreed to by Congress includes a provision allowing the Keystone XL project to move forward (except in Nebraska) unless the president determines within 60 days of enactment that the project is not in the national interest. Even without threatening rhetoric from Iran - or if fuel prices were lower - this project should have been approved. More than three years worth of risk assessment has already been conducted, and numerous government agencies have affirmed that the pipeline poses no significant environmental risk. The $13 billion project would create more than 13,000 construction jobs, 7,000 manufacturing jobs, and more importantly a stable and secure supply of oil for the U.S. That means more affordable energy for small businesses.
What happened to Broadband for Everyone? Unfortunately, many small business owners and individuals are still without broadband access. That means their economic opportunities are limited. The Federal Communications Commission (FCC) issued a National Broadband Plan in March of 2010, and as recently as April 2011 said that increasing broadband deployment "is one of the great infrastructure challenges of our time." Unfortunately, the federal government and FCC continue to stymie private sector initiatives that would accelerate broadband deployment and keep investment flowing into wireless technologies. For one, the FCC's unprecedented bias and backward view of competition in reviewing the AT&T/T-Mobile merger (and the DoJ's decision to sue to stop the deal) killed an important development that would have brought high speed wireless access to many areas of the country. Despite overwhelming support from unions, entrepreneurs, politicians from all levels of government and the technology sector, the FCC listened to hard leftists, proving it does not grasp how markets and business work. On September 23, the FCC also moved forward with "net neutrality" regulations, even though it lacks the authority to regulate broadband markets. This regulatory overreach and the uncertainty that comes with it serve as real disincentives for investing in broadband innovations and service. That is bad news for small businesses that have benefited so much from the expansion of and innovations in broadband networks as consumers, content providers and telecommunications players.
Karen Kerrigan, President & CEO
Wednesday, October 26, 2011
Small Business Not Important to Economic Recovery, according to former White House Staffer
So, is this what they REALLY think about small business inside the Obama White House? A former Obama staffer authored this New York Times Op-Ed, where discounts the importance of America’s small businesses and their policy priorities.
In the Op-Ed, “Small Isn’t Always Beautiful,” Jared Bernstein conveniently uses a new and skewed U.S. Treasury department "definition" of small business to make his arguments. The piece is riddled with errors, and incoherent logic.
I will point out that he gets one thing right – that the growth of new firms is way down (in fact at a 25-year low). He can’t explain this dynamic, but if you ask entrepreneurs and investors about why this is happening, they will tell you it’s all about currently misguided policies from Washington.
Karen Kerrigan, President & CEO
In the Op-Ed, “Small Isn’t Always Beautiful,” Jared Bernstein conveniently uses a new and skewed U.S. Treasury department "definition" of small business to make his arguments. The piece is riddled with errors, and incoherent logic.
I will point out that he gets one thing right – that the growth of new firms is way down (in fact at a 25-year low). He can’t explain this dynamic, but if you ask entrepreneurs and investors about why this is happening, they will tell you it’s all about currently misguided policies from Washington.
Karen Kerrigan, President & CEO
Friday, August 19, 2011
Small Business Optimism Has Yet to Recover from 2007
American Express OPEN released a ten year analysis of its Small Business Monitor Survey. From 2002 to 2011, the company has sponsored a semi-annual survey to gauge small business outlook and to learn more about entrepreneurs’ plans and activities for their firms. Up until 2007, small business optimism has been consistently high. However, from the beginning of the recession and financial crises to the current period, the surveys found that small business optimism has never recovered.
The America Express OPEN analysis of the surveys provided the following highlights:
• “Between the fall of 2002 and late 2007, optimism was high among virtually all small business owners, reaching its highest point in mid 2005. Optimism plummeted between late 2007 and early 2008, and has not recovered for small business owners regardless of region, size of firm, industry or sex of the owner.”
• “Business owners in the South and West were the most optimistic in the country prior to 2008. Over the past four years, much greater regional volatility in business outlook is seen.”
• “Prior to 2008, there was little difference in optimism by firm size. Since that time, however, there is more volatility in outlook among the larger small firms, with the biggest plunge seen among firms with 20 to 49 employees and those with $500,000 to $999,999 in revenues.”
• “Small retailers are the bellwether industry group. When business optimism plummets, their pessimism leads the way.”
Certainly the rough economy has played a role in the lack optimism among small business owners. But government policies have exacerbated their grim outlook and lack of confidence. That was made clear in a June 2011 “Entrepreneurs and the Economy” survey conducted by SBE Council, which found that 76 percent of small business owners were not at all satisfied with the federal government’s economic policies.
Small business owners continue to express their concerns over the surge of regulations coming out of Washington, uncertainty over taxes, as well as the high cost of health coverage that continues to tick higher as a result of the new health care law. The bottom line is that Washington has not produced any pro-growth policies -- only barriers and costly burdens that are dragging businesses, investors and the economy down.
President Obama just completed his heartland bus tour, and he got an earful from small business owners. Unfortunately, he dismissed what one Illinois farmer was telling him about the nuisance of government regulations. The President suggested the farmer was getting bad information from his business association, and that he should call the federal government (USDA) for accurate information.
There you go. A perfect illustration of why small business owners have little to no optimism.
Karen Kerrigan, President & CEO, SBE Council
The America Express OPEN analysis of the surveys provided the following highlights:
• “Between the fall of 2002 and late 2007, optimism was high among virtually all small business owners, reaching its highest point in mid 2005. Optimism plummeted between late 2007 and early 2008, and has not recovered for small business owners regardless of region, size of firm, industry or sex of the owner.”
• “Business owners in the South and West were the most optimistic in the country prior to 2008. Over the past four years, much greater regional volatility in business outlook is seen.”
• “Prior to 2008, there was little difference in optimism by firm size. Since that time, however, there is more volatility in outlook among the larger small firms, with the biggest plunge seen among firms with 20 to 49 employees and those with $500,000 to $999,999 in revenues.”
• “Small retailers are the bellwether industry group. When business optimism plummets, their pessimism leads the way.”
Certainly the rough economy has played a role in the lack optimism among small business owners. But government policies have exacerbated their grim outlook and lack of confidence. That was made clear in a June 2011 “Entrepreneurs and the Economy” survey conducted by SBE Council, which found that 76 percent of small business owners were not at all satisfied with the federal government’s economic policies.
Small business owners continue to express their concerns over the surge of regulations coming out of Washington, uncertainty over taxes, as well as the high cost of health coverage that continues to tick higher as a result of the new health care law. The bottom line is that Washington has not produced any pro-growth policies -- only barriers and costly burdens that are dragging businesses, investors and the economy down.
President Obama just completed his heartland bus tour, and he got an earful from small business owners. Unfortunately, he dismissed what one Illinois farmer was telling him about the nuisance of government regulations. The President suggested the farmer was getting bad information from his business association, and that he should call the federal government (USDA) for accurate information.
There you go. A perfect illustration of why small business owners have little to no optimism.
Karen Kerrigan, President & CEO, SBE Council
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