Small business success is the solution to our economic woes

Originally featured in The Hill:

While tax day is behind us, most small business owners have likely filed extensions to let them continue combing through the tax code looking for ways to keep their hard-earned dollars in their own coffers instead of in Uncle Sam’s. Fortunately, there have been some encouraging developments recently in Congress that could significantly impact small businesses.

The Senate passed a small-business friendly budget last month that indicates after months of political wrangling, lawmakers may finally be working on fiscal policies aimed at helping entrepreneurs. Coupled with the small business tax reform plan recently unveiled by Congressman Dave Camp (R-Mich.), we hope these developments are the sign of a new bipartisan consensus that small business success is the solution to our economic blues. Continue reading

Setting the record straight on health law’s delayed small business features

John Arensmeyer

John Arensmeyer

This memo was originally issued on April 4, 2013:

The Department of Health and Human Services’ proposal to delay critical requirements for small business health insurance exchanges in some states is a disappointment to Small Business Majority and millions of small businesses. It’s a letdown to small business owners and their employees looking forward to robust, competitive exchanges in 2014. We hope this proposal is recognized as counterproductive and is abandoned.

That said, there’s a tremendous amount of misinformation circulating about what the rule would actually mean. We want to set the record straight.

What the Rule Would Do

The proposed rule would delay two features of small business exchanges in some states until 2015. It would not delay opening of the exchanges themselves. Exchanges will still open Jan. 1, 2014.

The rule would mean that in some states, two features of the exchange won’t be implemented: 1) employee choice and 2) premium aggregation. These are wonky healthcare terms, but the impact their delay would have is fairly straightforward. Stalling employee choice means small employers will have to wait until 2015 to be able to offer workers an array of health plans to choose from. Delaying premium aggregation means an administrative function that would simplify the payment process for employers also won’t be available for a year. The two features are linked—premium aggregation is not needed without employee choice.

The Facts

Exchanges still open; small businesses still have more than one plan option

What the rule would not do—despite a multitude of reports saying otherwise—is strip small businesses of any coverage choice whatsoever, essentially forcing all small business employers and their workers into one health plan.

Indeed, word on the street is that all small businesses that enroll in exchanges will have access to only one plan. Some reports have even gone as far as saying this plan will be government-run. Neither one of these is true.

Multiple private plans still available

Whether the rule is finalized or not, come 2014, two things will be true: there will be a full array of private health plans offered through the small business exchanges, and employers will be able to choose a plan from them. Their employees can then decide whether to enroll in it. This is essentially how the small group market works right now. What the rule means is that employees themselves will not have a menu of plans to choose from until 2015—which is a new benefit the law provides for small businesses.

Only applies to certain states

It’s also important to note the rule requires only states that have federally facilitated exchanges to delay these features a year. Federally facilitated exchanges are those created by the federal government in states that haven’t chosen to create them on their own. The 17 states implementing their own exchanges can still extend employee choice and premium aggregation to their customers starting in 2014. Nearly 40% of small businesses in this country do business in the 17 states implementing their own exchanges. That means there will be employee choice among health plans for those businesses next year—if their states choose to give it to them.

No impact on self-employed

What’s more, delaying this rule does not impact America’s 22 million self-employed individuals, nearly 30% of whom are uninsured. As planned, these entrepreneurs will still be able to purchase insurance through the individual exchanges in 2014—a huge boon to owners who have struggled to purchase affordable insurance for decades.

The Bottom Line

While certainly disappointing, delaying employee choice and premium aggregation is not the end of the world. Starting next year, small employers will still be able to pool their buying power in the exchanges, giving them the kind of clout large businesses currently enjoy. They’ll still get administrative help and, in many places, will have more choices of plans than they currently do. All the original features of exchanges will go into effect in 2015.

Small Business Majority has been talking to real small businesses across the country since the law was passed three years ago. We know they like the features of the exchange that could be delayed, along with other key provisions including: 1) being able to pool their buying power; 2) the Medical Loss Ratio provision requiring insurers to spend 80% of premium dollars on care; 3) the preexisting condition ban; and 4) the small business healthcare tax credit, which in 2014 will only be available to small business owners who purchase coverage through an exchange. Our national opinion polling further underscores their support for these features.

We hope the proposed rule isn’t finalized, because small businesses nationwide are looking forward to employee choice and premium aggregation. Nevertheless, these features will still be in the exchanges in 2015—albeit a year late.

Arensmeyer: Small Businesses? Sequester Advice Is to Plug Corporate Loopholes

John Arensmeyer

John Arensmeyer

Originally featured in Roll Call:

Small businesses are critical to our economy. In fact, they generate, on average, 6 in 10 net new jobs. Fortunately for our leading job creators, Congress took an important step at the beginning of the year to protect them and their core customer base by extending income tax cuts for the middle class, as part of the fiscal-cliff deal. But lawmakers now have another economic obstacle in their path: the sequester — a host of automatic spending cuts that began March 1 because lawmakers couldn’t agree on a deal to reduce the deficit. These across-the-board cuts could have dire consequences for the economy and small employers. But all is not lost. There are still some areas in the budget where Congress can quickly pick up revenue to avoid the bulk of the cuts.
Unfair tax loopholes funnel billions of dollars into major oil and gas company coffers every year. Political leaders on both sides of the aisle have pointed to the need to get rid of them, and small employers agree.
Small Business Majority’s opinion polling found three-quarters of entrepreneurs support ending government subsidies to oil and gas companies. What’s more, 6 in 10 believe we should rein in the oil industry even if it means a small increase in gas prices.
If that sounds surprising, it shouldn’t, given our budget crisis. The sequester will reduce funding for everything from defense to infrastructure to small-business loan programs. It will cost the nation 1.5 million jobs and half our economic growth in 2013, according to the nonpartisan Congressional Budget Office.
That’s why spending cuts need to be wielded with a scalpel, not a chainsaw. Closing tax loopholes is part of a balanced approach to this crisis, and entrepreneurs agree it’s necessary. In fact, 92 percent believe big corporations’ use of loopholes is a problem, and three-quarters say their own business is harmed when corporations use them to avoid taxes.
It also doesn’t help small businesses or the economy as a whole when special tax treatment is given to hedge fund managers and Wall Street powerhouses. The controversial “carried interest loophole” lets finance titans pay a top tax rate of 20 percent on part of their earnings, only half of what they would pay at the top rate for normal wages and salaries. This puts other taxpayers at a huge disadvantage, including small-business owners. Our polling shows two-thirds of entrepreneurs believe hedge fund managers should have their incomes taxed at normal rates.
The bottom line is that policymakers concerned about our economy should be leveling the playing field for small businesses, not perpetuating tax breaks for the big boys. The CBO estimates that ending subsidies to gas and oil companies would shore up $40 billion over 10 years and closing the carried interest loophole could raise $21 billion. Together, these measures would significantly offset cuts caused by the sequester.
However, finding short-term solutions to ongoing budget crises shouldn’t be the end goal. Small businesses want policymakers to resolve this problem for the long term so they and our economy have the sustained fiscal certainty they need to thrive.

Energy-Efficient Opportunities for Small Business

John Arensmeyer

John Arensmeyer

Originally featured in Comstock’s Magazine:

Late last year, California held the nation’s inaugural cap-and-trade auction, where greenhouse gas emission permits were sold in an effort to monetize and reduce carbon pollution. And just last month, new cap-and-trade regulations on large power and industrial plants officially went into effect.

Those events and the topic of greenhouse gas legislation in general have incited considerable debate about the adverse economic effect such laws could have on small businesses at a time of fiscal strain and uncertainty. The answer is: very little. In fact, small businesses have much to gain.

California’s global warming law, commonly known as Assembly Bill 32, was approved in 2006 and focuses on large polluters — oil refineries, big factories and power plants — not the local gas station or dry cleaner down the street. Much fuss has been made about increased costs to small businesses. However, any increased costs would come through energy prices and not from the new law, according to economic consulting firm The Brattle Group, which estimates electricity costs to rise about 2.5 cents per kilowatt-hour per year.

And because the vast majority of small businesses in California are not energy-intensive (the average small business spends less than 1.5 percent of revenues on energy-related costs), any increase in energy prices will be modest. It’s important to note, also, that a national Small Business Majority poll released last year found 56 percent of small business owners support the regulation of greenhouse gas emissions, even if it means a possible increase in utility prices.

The real small-business skinny on AB 32 is that the law will create far more opportunities than problems. California’s small businesses will be able to take advantage of the increased investments, innovation and energy efficiency savings that the law will generate. That will translate into more demand for energy-efficient products and services, which will grow businesses and create jobs.

AB 32’s standards to reduce carbon pollution will fuel demand for and increase investment in energy-efficient goods and services, generating new prospects for the small businesses that provide them.

Michael Davis, owner of US Pure Water and The Water Store in Novato, has seen firsthand how increased environmental standards can create opportunities for small businesses like his. Davis’s company’s mission is to get people off bottled water and onto a more ecofriendly and economical water filtration and purification system. When he got a contract with the county of San Francisco to replace bottled water with water purification systems, he thought he’d have orders coming out of his ears. But city and county offices continued buying bottled water instead of purchasing systems from Davis, despite his contract.

“(The contract) was just a behind-the-scenes decision with no real movement,” Davis says. “No one placed orders for bottleless water because the purchasers for the city offices were not well enough aware of the cost savings, convenience and ecological advantages to bottleless water systems. But then the mayor issued an executive order, and the orders started rolling in. It would have taken years of educating the purchasers otherwise.”

AB 32 provides the same type of catalyst. By requiring big companies to become more efficient, it gives more opportunities to the little ones that, more often than not, are suppliers to their larger counterparts.

What’s more, an analysis conducted by the California Air Resources Board (CARB) concluded that the small-business service sector, which accounts for nearly 30 percent of the state’s total employment and 50 percent of all small business jobs, will see an increase of $4.6 billion more in revenue by 2020 and 15,000 jobs will be added. Additionally, the financial benefit of the law translates to an extra $1,115 per employee per year. These benefits are a result of requirements in the law that spur greater energy and fuel efficiency, CARB found.

Increased energy efficiency is good for the average consumer, too. CARB’s analysis estimated that expanded energy efficiency options will help increase Californians’ income by $2 billion annually, allowing them to spend more money on other local goods and services, often provided by small businesses.

But it’s not just clean energy-related businesses that can see opportunities from the law. AB 32 also creates incentives for more mainstream companies to “green” their operations — providing brand differentiation from competitors and garnering strong customer loyalty.

While AB 32 does not require small businesses to invest in energy efficiency improvements, it can provide opportunities for entrepreneurs that decide to make their businesses more sustainable. First, making investments in more efficient technologies will save businesses money on energy costs. And it will be easier than ever for small businesses to take advantage of these technologies thanks to the substantial resources included in the law devoted to helping them make improvements.

Second, increased consumer awareness of climate change spawned by the law likely will lead to increased demand for climate-conscious products and services — simultaneously creating opportunities for companies that successfully promote the “greener” aspects of their businesses.

The bottom line on cap-and-trade and AB 32: The only impact small businesses will see is the impact they create by becoming more energy efficient, by servicing larger businesses impacted by energy mandates or by differentiating themselves in the marketplace.

Small-business owners innovate to survive. It’s more than likely 2013 will see a host of small businesses doing just that.

Rein in Wall Street, Say Small Business Owners

Huffington Post

The latest jobs data shows small businesses are off to a running start in the job creation department this year, proving entrepreneurs are doing more than ever to lift post-recession employment. But it’s also true that small firms aren’t immune to the lingering effects of our disrupted financial market. Despite the mantra that slackening Wall Street’s reins will promote economic growth, recent national opinion polling reveals the majority of entrepreneurs believe the opposite: Wall Street should be held accountable for the financial crisis with rules that are stronger, not weaker.

A whopping 80 percent of small business owners agree with this, according to scientific polling conducted in January for Small Business Majority. Considering the oft-politicized nature of this topic, it’s noteworthy that not only was this a majority Republican sample, but more than seven in 10 Republican owners believe we need tougher rules for holding Wall Street accountable. Entrepreneurs aren’t politically minded, they’re business minded. That’s why this isn’t a party line issue for them. It’s a bottom-line issue, plain and simple, meaning it impacts their capacity to grow and hire.

With that in mind, it shouldn’t be surprising that nearly six in 10 entrepreneurs agree that for far too long, Wall Street banks and financial companies wrote their own rules while nobody was looking out for small businesses and consumers. They believe we need the Consumer Financial Protection Bureau (CFPB) — a federal organization that helps prevent financial companies from using abusive lending practices that can affect small businesses. Eighty-four percent of owners generally support the CFPB, underscoring the consensus that our nation is long overdue for a fairer financial system.

Small business owner Shaundell Newsome couldn’t agree more. Shaundell, the president and CEO of Sumnu Marketing in Las Vegas feels more work needs to be done to give small businesses the ability to push back against unfair financial practices. “A lot of small businesses don’t have the power or the resources to fight against the big banks and financial companies,” he said. “These companies’ practices haven’t really changed since the recession, which is why it’s incredibly important the Consumer Financial Protection Bureau was created to keep them accountable. However, another factor is that many of the protections individuals are seeing should be afforded to small businesses, as well.”

Herein lies another issue the poll shed light on: the strong link between small business finance and personal credit. Fifty-eight percent of respondents have used a personal credit card to finance their business, and 53 percent have personally guaranteed a loan for their business. This helps explain why small businesses strongly support provisions of the 2009 Credit CARD Act — although ‘strongly’ might be an understatement.

Every single provision we polled on from this law, which established a series of consumer protections from banks and other financial institutions, was supported by nearly 100 percent of respondents. For example, 98 percent support requiring credit card companies to provide clear descriptions of what factors trigger a higher interest amount. But this requirement and others only apply to personal credit cards. Echoing Shaundell Newsome, a sweeping majority of 19 in 20 small employers want consumer protections expanded to protect businesses, too.

If businesses had stronger protection from predatory financial practices, imagine how much more they could do to grow the economy. New employment data indicates firms with fewer than 50 employees created six in 10 new jobs in January. That’s a big step in the right direction. However, positive steps forward don’t mean it’s time to ease back on Wall Street financial institutions, as small business owners have made clear. If we want them to continue playing a significant role in rebuilding our economy, entrepreneurs need protection from the practices that caused our fiscal crisis.