There’s been a lot of talk about small businesses this election season, but this week in Washington small business owners did the talking. Their focus was on access to more money to expand their businesses. Some argued for loans, others for tax breaks.
The Small Business Majority flew in 14 entrepreneurs from around the country for two days of meetings with House Minority Leader Nancy Pelosi, Senate Small Business and Entrepreneurship Committee Chair Mary Landrieu, and members of the U.S. Small Business Administration. They discussed access to capital, healthcare reform, clean energy policies, and legislative solutions to economic issues such as jobs creation. And the entrepreneurs urged Congress to pass bipartisan legislation allowing more credit unions to lend to small businesses.
Meanwhile, several more business owners (unrelated to the Small Business Majority) explained to members of the House Subcommittee on Economic Growth, Tax and Capital Access yesterday how uncertainty about the future of the tax code has hamstrung their businesses.
Mike Brey, president of the Laurel, Md., business Hobby Works and a member of the Small Business Majority's Network Council, told Yahoo! Small Business Advisor that he built his company on the back of SBA 7(a) loans. He said he told legislators that, “While things have gotten better, the way banks use SBA loans have changed. It appears to us that banks are using the SBA to guarantee loans that in a different economic climate they would have been making without SBA.” Brey told legislators and SBA officials that he’s had a good year and would like to open two new stores now and asked, “How can we free up some of those loans that used to be [available] again?”
Manhattan restaurateur Eric Blinderman attributed his ability to open a second eatery to the 2010 Jobs and Credit Act, “which invested in projects to help entrepreneurs like me grow our businesses.” Small Business Majority founder John Arensmeyer blogged about the trip: “Eric’s story is one of many that offers proof of how important it is to support entrepreneurship in the United States. And there are so many ways for Congress to give that support to the people who deserve it.”
In the House subcommittee hearing, titled “Adding to Uncertainty: Small Businesses’ Perspectives on the Tax Cliff,” Theresa Kern, the owner of a Chicago-area steel erection firm and past president of Women Construction Owners & Executives, described how an increase in the tax rate would have a “significant deleterious effect” on her ability to grow her business. If Congress does not act to extend Bush-era tax cuts, as a Subchapter S corporation she will pay a higher personal income tax rate on profits over $200,000--money that Kern said she would otherwise reinvest in her company.
Doug Harmon, member of the North American Die Casting Association and CEO of a Minneapolis manufacturing company with 250 employees, also described dire consequences of paying higher rates on his business’ earnings above $200,000. He told the subcommittee that, “For manufacturers like me, this tax cliff or taxmageddon is a serious threat. … if the current tax rates are not renewed by January 1, 2013, and individual rates increase by nearly 5 percent at a minimum, we will face a hefty increase in our tax bill. We will not be able to reinstate the 401K match for our employees’ retirement nor will we have the extra funds to increase our workers’ Health Reimbursement Accounts. We will likely hold off hiring any new employees.”
But Small Business Majority member Mike Brey recalls how much stronger his business was when the federal budget was balanced. He said he would be willing to pay higher taxes if it helped get the economy on track and pay down the debt. “For me, going back to those tax rates is the tradeoff for having a stronger economy and more customers. It’s a trade off I am absolutely willing to make,” he told Yahoo! Small Business Advisor.
During his visit to the White House this week, Brey told officials that his toy and hobby supplies retail business does best when customers have confidence that they will have money in the future. “We’re finally about to have a Christmas season tacked onto the end of a good year. The last thing I want is to have the news dominated by fear mongering to scare the heck out of all my customers,” he said. “It’s so important that the economic policies get the country back on a path to fiscal solvency.”
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