THE STATE OF AMERICAN SMALL BUSINESSES AND THE HURDLES THEY FACE
For American small businesses, the recession never ended. While they have recovered somewhat from the depths of the Great Recession, they still haven’t returned to their pre-recession peaks—nearly seven years later. And while the economy as a whole has been stagnant, a host of new regulations and taxes threaten the growth of small businesses even more. According to top indicators, small businesses are still operating in a purgatory between recession and recovery.
Recent small business polling* data by The Job Creators Network finds that only 19 percent (one in five) of small business owners plan to hire additional employees over the next year. And only 27 percent (fewer than one in three) think that doing business will be easier over the next year. Numerous other indicators tell a similar story of an ongoing stagnation of American small businesses.
The implications of small business struggles are serious. Small businesses account for half of all jobs and two-thirds of new jobs created in the United States. They represent about half of the economic output of the country. As small businesses goes, so goes the American economy as a whole.
Drawing on numerous indicators, this report will reveal the state of American small businesses and highlight the main impediments to its flourishing. Though there are numerous reasons for its ongoing stagnation, a recent poll*, which is backed up by other indicators, finds that the main reasons are (1) overtaxation, (2) overregulation, and (3) a lack of access to capital.
These happen to be impediments that are entirely within policymakers control to fix. Meaningful policy reform to bring small businesses back, finally get the economy going again, and provide opportunity for millions of American employees must address them.
*National poll of 408 small businesses conducted by Connection Strategies on January 7th and 8th, 2016.
BSBB Tax Reform Act Introduced to Congress
American small businesses need these tax reforms now. Small business expansion has slowed to a crawl and the number of new entrepreneurs attempting to open a business has declined—with the number of businesses less than a year old falling by one-third since the 1980s. The engine of small business job creation is idling and to kick-start it we need to focus on reforms, such as this legislation, that will target the majority of small business job creators.
Seventy percent of small businesses do not pay taxes at the corporate rate. They are structured as sole proprietorships, partnerships, or S-corps and the profits they make are “passed-through” to the owner and counted as individual income on their tax returns. These entrepreneurs can pay federal tax rates as high as 40 percent. This is why it is so important to address the rate at which specifically small businesses—or “pass-throughs”—pay taxes.
the Bring Small Businesses Back Tax Reform Act (H.R. 1425)—introduced by U.S. Representatives Randy Hultgren (IL) and Jason Smith (MO)—would reduce the tax burden on the nation’s largest job creators—small businesses.
The BSBB Tax Reform Act would:
- Lower the tax rate for small businesses’ first $150,000 of income to 12 percent and to 25 percent for all income above that threshold.
- Allow pass-through businesses to immediately expense all investment in equipment.
- Simplify cash accounting for tax purposes for all businesses with gross receipts less than $25 million.
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