October 25, 2014

What’s Hurting Small Business These Days?

red tapeIn separate January surveys, Gallup’s pollsters asked samples of American small business owners and adults how different political and economic situations were affecting them.

The results tell an interesting story. While many Americans are adversely affected by energy prices and health care costs, a higher fraction of small business owners feel that taxes and government regulations are hurting them.

The Comparison is Admittedly Imperfect

Gallup interviewed small business owners in 2013, between January 7th and 11th and American adults between January 21st and 22nd. More importantly, small business owners were asked about whether different situations were hurting or helping “the operating environment” of their businesses, while people in general were asked whether the situations were hurting or helping their “finances.”

Nevertheless, the data provide insight into the ways that political and economic conditions affect small business owners and non owners.

The two groups had statistically similar concerns about energy prices, with 79 percent of American adults and 77 percent of small business owners telling the interviewers that energy prices are a problem. (For both the surveys, the margin of error is +/- 4 percentage points.) Health care costs are also hurting both groups, with 73 percent of small business owners and 68 percent of American adults reporting this to the surveyors.

And both groups assessed the impact of the federal government’s debt ceiling similarly, with 56 percent of adults and 63 percent of small business owners saying it was harmful.

The two groups had similar views about the effect of federal spending cuts, though fewer members of both groups saw these as harmful: 46 percent of American adults and 40 percent of small business owners.

The small business owners differed from the overall sample in how much taxes, government regulation, credit, and immigration policies hurt. While 69 percent of American adults said that taxes were hurting their personal finances, 80 percent of small business owners said that taxes were hurting the “operating environment” of their companies.

Similarly, 72 percent of small business owners said that government regulations were a problem, while only 48 percent of American adults said so.

Fewer small business owners thought that immigration policies were harmful than American adults (38 percent to 25 percent). By contrast, 47 percent of small business owners felt credit availability was was a problem, as compared with 30 percent of American adults.

While the surveys don’t tell us whether small business owners think differently from other Americans or whether the situations affect small business operations more than personal finances, the differences are intriguing. Taxes and regulation are problematic for a larger fraction of small business owners than Americans overall.

9 Comments ▼

Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

9 Reactions

  1. Scott,

    Great highlights! I wonder if small business adopts more technology, the sentiment about regulation becomes intensified? Tech and legislation is increasing in conflict, and although some proposal are being worked out, I still wonder how much of that dialogue is including small business owners in the discussion.

  2. Interesting points. I’d be curious to know what the results of a similar survey would be in Canada where our tax rates are higher. I think perhaps what could be driving the survey numbers, at least from a Canadian perspective, is lack of financial/tax education. No one wants to hear someone babble on about the income tax act – so many small business owners simply hand over their books to their bookkeeper/accountant at year end, then get back a number they have to pay to the CRA. Since many small business owners will not pay much in tax instalments throughout the year, it can come as one big hit during tax time when they receive the lump sum number, and they will naturally not be thrilled. I think it’s important that small business owners actually go over their books with their accountant, so they understand why they owe the tax they owe and how they can improve in the following years. There are a few tax credits in Canada which many small business owners don’t take advantage of, simply because they don’t know they exist. By speaking to an accountant who keeps things simple – business owners can begin to understand their books, reduce taxes in the long run, and will hopefully be slightly more forgiving when it comes to the next “what’s hurting small business owners” survey.

  3. Interesting. Now, let’s start getting a better picture of small business by measuring a sample of the larger business population, and, more importantly, those that have the potential to create the most new net jobs…non-employers and those with 10 and fewer employees making less than one-million.

    Of the 27 million businesses that filed tax returns in 2003, 26 million had sales of less than $1,000,000. (http://www.irs.gov/uac/SOI-Tax-Stats-Integrated-Business-Data)

    And, here is the criteria Gallup selected to survey as small business: (http://www.gallup.com/poll/160100/healthcare-costs-taxes-worry-small-businesses.aspx)

    “Results for the total dataset are based on telephone interviews with 601 small-business owners, conducted Jan. 7-11, 2013.”

    “Sampling is done on a random-digit-dial basis using Dun & Bradstreet sampling of small businesses having $20 million or less of sales or revenues. The data are weighted to be representative of U.S. small businesses within this size range nationwide.”

  4. As a small business owner, I know that taxes and regulations take up an increasing amount of our internal time and resources. They are big issues for us, and before I was a business owner I never really thought about them.

    The insidious thing about taxes and regulations is that they grow faster than your internal growth rate. You start out as a single-person business, and things are fairly simple and uncomplicated. But as you try to juggle growth and bringing on new customers, taxes becomes more expensive and government red tape takes up more time.

    All reasonable business owners accept that you need to pay some taxes and that there has to be some government for an orderly law-abiding society. Without the rule of law, our businesses wouldn’t be worth anything, and so government has value for us. We realize that.

    But it’s the degree of growth of taxes and regulations that are of great concern — it’s a question of TOO MUCH.

    I think what causes huge irritation among business owners is that regulation and tax growth seem unchecked. As business owners, I think we need to scream and stamp our feet to let Washington and our state capitals know small businesses are not just to be viewed as open checkbooks.

    We need checks and balances to keep spending in line, not just checks from our checkbooks.

    – Anita

  5. I’m the owner of a technology consulting and service company in Philadelphia. My #1 gripe is taxes in Philadelphia. The taxes are a disincentive to being in the city, despite it being more efficient and easier to reach more customers verses operating in a suburban market.

  6. Scott,

    I appreciate you shedding some light on this points. It’s vital that we are informed of these things so that we can make the proper adjustments if necessary.

    Ti

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