On Friday, the House of Representatives passed the CARES Act—a legislative package intended to soften the economic fallout of the coronavirus outbreak. The legislation is particularly beneficial to small businesses, which are in dire need of a lifeline amid the pandemic. President Trump is expected to sign the bill imminently.
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As consumers take precautions to protect themselves and governments impose restrictions to limit the spread of the virus, Main Street small businesses and their employees are among the hardest hit financially. These businesses typically operate on razor-thin budgets; revenue from the previous day often covers the following day’s overhead and payroll. Even a couple of days of disruption can spur financial challenges. Several weeks or months is another obstacle to clear entirely.
Considering small businesses are the backbone of the economy and employ nearly half the country’s workforce, targeted, short term relief provided by Congress is welcomed.
A number of provisions in the CARES Act aim to help struggling businesses and their employees who are laid off out of necessity. But perhaps the most helpful is the $349 billion in forgivable small business loans. The funds—coordinated by the Small Businesses Administration, but distributed through private banks—will give entrepreneurs much needed cash to keep payroll flowing, as well as cover rent, utilities and other overhead.
Most importantly, it will keep small businesses primed to reopen fully once the public health crisis subsides. Getting the economy moving at full-steam-ahead quickly will be critical in order to repel a lasting economic downturn. It’s not a bailout, but a strategy to extend the strong economy previously enjoyed by Americans to the post-coronavirus era.
Passing the CARES Act is a good first step and entrepreneurs are thankful. But now we need to keep the ball rolling in order to fully shore-up our country’s small business community.
One suggestion is to enact a payroll tax holiday for the remainder of 2020—specifically for small businesses employing fewer than 100 people. The move will benefit the vast majority of small business job creators and provide them with the extra boost needed to clear the aftermath of the pandemic.
Additionally, a subset of entrepreneurs often ignored should be included in the payroll tax holiday: independent contractors. Many of these self-employed business owners pay both the employer and employee portion of the payroll tax. Therefore, qualifying these individuals for the tax cut will supply double the economic benefit.
It’s also important to note the earnings ceiling tied to the Social Security contribution of the payroll tax—which accounts for the largest portion paid to Uncle Sam per paycheck. The limit ensures that independent contractors who are struggling the most will benefit the most. It’s not simply a give-away to the minority of self-employed individuals who are fortunate enough to operate successfully in this challenging environment.
The public health crisis is putting America’s small business entrepreneurs to the test. Congress should continue to extend a helping hand so the post-coronavirus recovery can mimic the economic advancement made over the last three years. It will be an uphill battle but hopefully our elected officials will deliver.
Elaine Parker is the President of the Job Creators Network Foundation.