Source: National Small Business Association’s May 27, 2010 report: “Squandered Opportunities and Misplaced Priorities: Why Small Business is Too Big to Fail”
No. 1: Excluding the self-employed from health-care tax breaks
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The new health-care law extended the use of cafeteria plans to small businesses with fewer than 100 employees. Cafeteria plans allow employees to choose and pay for health benefits with pre-tax dollars, which can result in as much as a 30% savings. But the new law failed to eliminate the requirement that all cafeteria plan participants be “employees.” This precludes participation by the self-employed, which comprises 25% of the working population, according to the Kelly Services staffing firm.
No. 2: Continues to stall on Small Business Lending Fund
It was early 2009 when the first proposal was floated to use $30 billion of the TARP money that bailed-out banks had paid back to the government to create a Small Business Lending Fund. The money would be used to address the severe credit crunch that continues to constrict small businesses. It took until mid-March 2010 for a formal proposal to emerge. Despite widespread, lip-service support in Congress, debate has only just begun. According to the NBSA’s 2009 Year-End Economic Report, 39% of small businesses cannot obtain adequate financing.
No. 3: Won’t extend popular loosening of SBA loans, fees
When the $787 billion American Recovery and Reinvestment Act was signed into law in February 2009, it included a temporary provision that eliminated borrower fees on the SBA’s popular 7(a) and 504 loan programs. It also temporarily raised the limit of an SBA loan guarantee to 90% of the borrowed money , up from 75%. These provisions have run out and been extended several times since then, rendering many small businesses unable to access critical SBA loan funds on a continual basis. Several attempts to add a more permanent extension through 2010 have failed, though a bill to do so has been introduced.
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No. 4: Won’t allow credit unions to increase small-firm lending
Credit unions are limited in their ability to lend to small firms. Small business lending by credit unions is capped at 12.25% of total assets. Early this year, legislation was introduced to increase the cap to 25%. Though bills introduced in both the House and the Senate enjoy broad support, no action whatsoever has been taken. The Credit Union National Association estimates that doubling the cap would increase small-business lending by $10 billion within the first year of enactment, producing more than 100,000 new jobs.
No.5: Didn’t mandate much cost containment in health-care reform
Health-care premiums for small businesses will continue to increase sharply under the new health-care law, even the Congressional Budget Office admits. The new law mainly addressed access to health care and does little to encourage cost-conscious behavior by consumers. For instance, an excise tax on so-called “Cadillac plans” doesn’t take effect until 2018. Flexible Spending Account contributions are restricted in the new law, and over-the-counter medications have been prohibited as eligible FSA medical expenses – further burdening small employers and their workers who can’t afford more shrinkage of disposable income.
No. 6: Can’t reach compromise on R&D funding
A successful SBA program that funnels research and development money to small businesses would be greatly diluted if the House version of a bill opens it up to large venture capital firms. According to the SBA’s current Small Business Innovation Research program, any federal agency with a research budget in excess of $100 million a year must reserve 2.5% for contracts to small businesses. The SBIR program, a key means of capital for small R&D companies, generates new patents at the average pace of seven per day. Small R&D companies employ 38% of all U.S. scientists and engineers, and produce 20 times as many patents per as universities. Since 2008, the House and Senate have been unable to reach compromise on reauthorizing the program, causing seven short-term extensions. The House bill would open up the program to venture capital firms and universities; the Senate version keeps the “small” in the SBIR program.
No. 7: Didn’t allow self-employed a tax break on health-insurance premiums
America’s 22 million self-employed pay 15.3% more in taxes than any other business entity because they aren’t allowed to deduct their health insurance premiums as a business expense. During debate of the health-care reform bill, a provision to allow even a 50% deduction of health insurance costs for the self-employed ultimately was not introduced. This simple fix could make paying for health insurance more equitable for small businesses. “Congress’ failure, time and again, to eliminate this byzantine disparity in the tax code, which penalizes the self-employed, is baffling,” the NSBA report states.
No. 8: Didn’t extend credit-card reform to small businesses
Congress refused to include small-business credit cards in the protections enacted under the Credit CARD Act of 2009. According to NSBA’s 2009 Year-End Economic Report, 68% of small business owners reported that the rates and terms of their credit cards had deteriorated in the last five years, making these protections a priority for small business.