September 21, 2014

Approaching the Cliff: Deficit Talks Raise Concerns for Small Businesses

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With deficit talks under way in Washington to avoid a looming shortfall at the end of this year, potentially higher taxes are only one issue small businesses have to worry about. Find out more about how a plethora of policy changes may affect U.S. small businesses in 2013 in our detailed update below.

More Questions Than Answers

Going off the cliff. Even if lawmakers manage to avoid going over the “fiscal cliff” at the end of this year, their solution might still send small businesses over a similar precipice. Among the benefits that may be either lost or not reinstated include special depreciation allowances for capital investments, some work opportunity tax credits, temporary exclusion of 100 percent of gain on certain small business stock, enhanced charitable deduction for donating computers to schools and libraries, and more. The New York Times

A different kind of healthcare crisis. Many small business owners worry that the new Affordable Care Act scheduled to go into effect in 2014 will be too costly for them to bear. The result could be the opposite of what lawmakers have intended, with business owners forced to decide between laying off workers to avoid paying for insurance or paying a penalty per employee for not providing coverage. This could require employees to foot the cost of their entire healthcare insurance. The Washington Post

Will taxes on the rich impact small businesses? Yes, but how much really depends upon who you ask. An estimated 941,000 small businesses in the U.S. make more than $250,000 and could face tax increases of as much as $8,000 more a year. Some business owners say this kind of increase will deprive them of money they could have reinvested in growing their business, meaning ultimately slower economic growth. But other business owners insist the increase will not be sufficient to hamper growth if sales are strong. CBS Evening News

New winners and losers. A peculiar side effect of one of the proposals presently on the table in Washington to fix a looming deficit would actually have corporations paying less, while small businesses pay more, says one report. The report claims that while the proposal supports raising marginal tax rates on those making over $250,000, including some small business owners, to 39.6 percent, it would also support decreasing the corporate tax rate to 28 percent, a step in the wrong direction, say critics. The Weekly Standard

Positives and Negatives

On the positive side. Not everyone is worried about the outlook for small businesses. Guest blogger Penny Munroe points to a number of policies some say will boost small business growth, including eighteen separate small business tax incentives introduced during the administration’s first term, efforts to improve access to small business loans, efforts to boost export and trade, and more federal contracting opportunities and infrastructure investment. Small Biz Diamonds

The bitter with the sweet. A majority of small business owners participating in the Hartford 2012 Small Business Success Study felt their taxes would likely increase in the coming year, even though responses were collected before the results of the U.S. Presidential election were known. But on the upside, concern and uncertainty led small business owners and entrepreneurs to do what they do best—start looking for ways to survive and thrive, no matter what the economic climate. For example, the same businesses said they were looking for ways to cut costs, build better relationships with customers, and hunt for new business, good advice in any economy. Open Forum

EU Initiative

EU fights for small business growth. The U.S. is not alone among nations looking to small businesses for revitalization and fretting about how public policy might impact their success. The EU now includes an estimated 23 million small businesses, and public policy is now focusing on how to help them grow and flourish. To that end, the European Commission recently held an inaugural SME Assembly to look for ways to improve policy across the continent to help those businesses succeed. GrowthBusiness.co.uk

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