Small Business is Big Business
The U.S. Chamber of Commerce issued a statement on access to capital for small businesses directed to the Congressional Committee on Small Business, the Subcommittee on Finance and Tax. The statement sets forth two policy recommendations that are particularly important at this time. First, Congress passed legislation calling for a 3% tax withholding on all government payments, which affects government contractors. While the requirement will not go into effect until January 1, 2012, businesses and federal, state and local governments are spending funds to prepare for its implementation, which expenses the Chamber believes to be unnecessary for a requirement that should be repealed. The Defense Department estimates the cost of compliance with this requirement to be $17 billion over the first five years, exceeding any forecasts of revenue gains. For small businesses that contract with the federal, state and local governments, this onerous requirement should be repealed. Second, the Chamber argues against raising tax rates, reminding Congress that many small businesses are organized as Subchapter S corporations or sole proprietorships, such that increases in personal tax rates increase their cost of capital. This would reduce capital available to reinvest in small business at a time when banks have already choked back on lending to this sector. The Chamber of Commerce represents more than three million businesses in the U.S., of which 96% have fewer than 100 employees. Let’s hope that Congress acts on the Chamber’s recommendations.