- The Washington Times - Tuesday, January 12, 2010

ANALYSIS/OPINION:

For small business owners, 2009 ended with greater uncertainty than when the year started. While there have been some encouraging signs recently that the economy as a whole may be turning around, that’s not the case for America’s principal job creators. Among their top worries is what is going on in Washington.

Our December Small Business Economic Trends report showed the Small Business Optimism Index dropping again, to numbers that are near the record lows in the survey’s 35-year history.

More small businesses (15 percent) plan to cut jobs in the next three months than add them (only 8 percent). That’s a troubling sign in an economy that’s continuing to experience double-digit unemployment rates. Capital spending plans hit a record low, and owners report that they are still cutting inventories. Profit trends are the worst reported in 35 years.

To put the current situation in some context, the optimism index fell below 90 in only one quarter during the 1980-82 recession. The index has now been below that level for six straight quarters in this downturn, and we see no reason to expect that it won’t be seven in a row.

The primary reason for small business owners’ attitude has been the political climate. Worries about the effects of health care reform, fears of new taxes, uncertainty about the potential costs of an energy bill with a cap-and-trade program - all of these have contributed to conditions that are the enemy of economic growth and investment.

Thus, Washington needs to restore confidence in the country and the economy. That can only happen by creating a positive climate that takes into account both economic and policy factors.

It’s clear that the administration and Congress are shifting their focus to the economy and creating jobs. To successfully address entrepreneurs’ concerns, policymakers must:

c Recognize the threats to small business. The horizon is filled with cost unknowns in addition to those mentioned above, from paid family and medical leave to card-check legislation on down to state decisions about their budgets and finances. Our policymakers need to come to grips with this reality and help, not hurt, small businesses.

c Pass full tax write-offs to encourage new start-up businesses and a payroll tax holiday that would put more cash in customers’ hands, as well as businesses. This tax relief is the obvious way to improve both desperately needed sales and balance sheets.

c Keep individual tax rates low. Most small businesses pay their taxes as individuals rather than corporations. A low individual tax rate is important to small businesses of all sizes, so keeping the current low rates from the 2001 and 2003 tax cuts, scheduled to expire this year, is vital to small business’ recovery. Now is not the time to raise taxes on any small business.

c Address the estate tax. The uncertainty surrounding this tax is a challenge for many business owners. It means more time and money spent on accountants, attorneys and life insurance. This is all money that could be better spent investing in the business.

The cost of doing business, including taxes, is key to every decision a small business owner makes, especially when thinking about adding workers. In tough times, these considerations are even more important.

With many small business owners still struggling to work their way out of the recession, it’s important for the administration and Congress to provide not just short-term incentives and relief, but also long-term certainty about the future. Once they do that, entrepreneurs will be more willing to make new investments in their business, begin to create jobs again and lead our economy out of the doldrums.

Dan Danner is president and CEO of the National Federation of Independent Business in Washington.

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