As of late, Washington has fallen in love with small businesses. Like a girl with a school yard crush, politicians just can’t seem to stop talking about them. But what does all this talk mean? What’s the reality behind the ideas? Be cautious: politicians are like magicians, except instead of smoke and mirrors, these illusionists distract us with seductive buzzwords. Throwing around phrases like “job creation” and “tax cuts” make the debates seem entirely beneficial to small businesses. In reality, these may just be code for expensive and empty gestures. To help you see through the smoke, here is a straightforward look at the actual debates underlying all the rhetoric.
Washington’s Love Affair With Small Businesses: The Truth Behind the Pick Up Lines
When they say “Job Creation”:
Many Americans are still struggling to find employment. As of March 2012, the national unemployment rate was 8.2 percent, according to the Bureau of Labor Statistics. This means approximately 1 in 12 Americans are actively looking for work and unable to find it. In the meantime, small businesses are attempting to create jobs. However, small businesses have limited job creation abilities when faced with problems like limited cash flow and difficulty accessing credit.
The government is trying to address these problems with legislation to open up credit, such as raising credit union member business lending limits and reward small businesses who are hiring through tax cuts. The question remains whether these measures are effective and well-directed or simply politicizing.
When they say “Tax Cuts”:
When we ask whether or not government measures are working, we should look closely at tax cuts. Tax cuts are one of the primary ways the government tries to help small businesses. For example, House Majority leader claimed that small business tax cuts “will help create more than 100,000 new jobs a year once fully in place,” reports the Washington Post. (The Washington Post argues that in reality, the real number of added jobs would be significantly lower).
Both Democrats and Republicans have introduced their own tax cuts, supposedly geared toward small businesses. They have lovely names like the “Jump Start Our Businesses Act” and the “Small Business Jobs and Tax Relief Act” but the relief may be closer to throwing a paper towel into the ocean. While tax cuts can save some small businesses money, others are just giving bigger businesses (including Paris Hilton’s company) huge savings.
When they say “Health Care”:
A hot topic on debate is whether or not “Obamacare” will help small businesses. Business insiders fall on both sides of the fence and right now the Supreme Court is debating if the act is even constitutional. At the end of the day, small businesses lie close to the center in the health care debate.
As the White House website itself states, the current system is essentially imposing a “tax” on small business owners and their employees, costing them a significant amount of money. “Due to high broker fees, fixed administrative costs, and adverse selection,” reads the statement, “small businesses pay up to 18 percent more per worker than large firms for the same health insurance policy.” While the primary aim is to make health insurance plans cheaper for small businesses, current measures run the risk of actually increasing premiums.
Oftentimes when politicians say anything, they really mean, “Vote for me.” When you hear promises of job creation and tax cuts, keep in mind that these are complex issues, backed by a great deal of debate and a number of vested interests. Power-hungry politicians need to know that for the smart small business owner, honeyed words will never work.