A Little Air for Small Business

Article excerpt


Politicians care. How do we know this? Because they constantly remind us. Politicians care about the children, quality health care for everybody, and the environment. In addition, when it comes to the economy, politicians care about the small business community. Unfortunately, some elected officials have funny ways of expressing their love.

Should federal, state and local officials care about small business? Absolutely. Small business is the backbone of the U.S. economy. There has been a lot of talk lately about lackluster or nonexistent job creation. Consider that businesses with fewer than 500 employees account for 99.7 percent of all employers, and they employ more than half the private-sector work force, while creating between 60 percent and 80 percent of all new net jobs, according to U.S. Small Business Administration's Office of Advocacy.

So, what's the best way for politicians to express their appreciation for small business? Of course, many want to provide government handouts, such as through subsidies or government-backed loans. However, this isn't such a hot idea. Politicians and government bureaucrats don't operate under the proper incentives to be playing venture capitalist. Besides, why should taxpayer dollars be used or placed at risk to help certain businesses, especially since some of those tax dollars come from other businesses?

No, the best thing politicians can do for the entrepreneurial sector of the economy is to establish a hospitable climate in which all kinds of businesses are able to start up and hopefully flourish. At the federal level, we've seen some positive developments recently for entrepreneurs and small businesses, namely, the tax cuts passed by Congress and signed by President George W. Bush.

The key measures were reductions in the personal income tax and the capital gains tax. The top personal income tax rate has been cut to 35 percent (from a recent high of 39.6 percent), and the capital gains tax rate declined from 20 percent to 15 percent. These tax cuts are helping the economy by boosting incentives for working, investing and risk-taking.

Of course, there are still problems when it comes to the federal government. For example, the regulatory burden remains quite daunting, and huge spending increases in recent years divert resources from the private sector and raise the specter of higher taxes down the road.

What about the states? Are policies helping or hindering small business? In the "Small Business Survival Index 2003," published by the Small Business Survival Committee each year, I attempt to provide some answers.

The report ties together 21 different government-imposed or government-related costs into one index. Among the costs included are personal income, capital gains and corporate income taxes, property taxes, electricity costs, health care and workers' compensation costs, and crime rates. …