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11-21-12


An uncertain time for
many small businesses

by Andrea Plunkett
Landmark reporter

Contrary to what the label might imply, the effect “small businesses” have on the economy and job market is anything but small.

The federal government estimates that small businesses make up 99.7% of U.S. employers; between 1993 and 2011, small firms accounted for 64% of all net new jobs in America. But as the dust settles after Election Day, small business owners may be left with more questions than answers about what might lie ahead for them.

An informal survey of local entrepreneurs tells the tale: of 22 respondents, over 70% believe the business climate today is worse than it was four years ago, and more believe that they will have to lay workers off than be able to hire more employees.

In response to the survey, one local manufacturer said that not only is the uncertainty of the economy hurting his business, but changes in “health care and [OSHA, EPA, IRS] regulations” are making investment decisions difficult for him and his customers.

“We are a precision machining job shop with no product. We make parts for our customer's product or support. Uncertain economic times affect their sales and desire to expand, which directly affects our sales,” he said.
And for him, there are no easy cost-cutting solutions.

“We cannot lay off skilled workers as there is a shortage [of them] and we will not get them back,” he said, “so we carry the extra staff at a negative, hoping business will pick up.”

The concerns aren't reserved to local small business owners. One business leader has been especially visible and vocal on the national stage about his plans post-election. John Schnatter, or “Papa John” of Papa John's Pizza, has said that he plans to cut back the hours of his employees in order to comply with the new regulations imposed and to keep his company profitable.

But are those real concerns or just hype from a small percentage of business owners?

“Those are absolutely real concerns,” says Dan Mehan, president of the Missouri Chamber of Commerce. “Just look at companies like Hostess and Boeing.”

Indeed, the survey makes clear that there are plenty of worries on the minds of local business owners, and most come from the same source: the government.

“The government telling us how to run our business is one of our biggest frustrations,” said one entrepreneur in the transportation industry who was surveyed.

Despite an ever-increasing government presence expansion, this business owner said that there weren't any aspects about running his business that were improved compared to four years ago.

CNN estimates that regulations set forth by the federal government cost over $1.75 trillion each year to implement. Depending on the industry, regulations range from environmental to health codes to safety requirements. While some regulations may be intended to save money, the ever-changing nature of implementation leaves many small business owners in a bind.

"The government regulations take almost 100% of my time as opposed to just five years ago when it took maybe 20% of my time,” said one local business owner with close to 50 employees.

“Every city and state has increased the permits, licenses required of business to raise revenue. Every year there is a new law or requirement that falls on the employer.”

Regulations aren't the only thing worrying small business owners.

There's also a situation that Federal Reserve Chairman Ben Bernanke calls “Taxmageddon:” At the end of the year, there is slated to be a nearly $500 billion tax increase caused by expiring tax cuts from prior administrations and major new tax increases.

Many small business owners fall into the top tax bracket simply because their business revenue passes through entities such as partnerships or sole proprietorships that are taxed at the individual rate.
In 2013, the top statutory tax rate will reach 39.6%, and the top tax on capital gains will rise from 15% to 23.8%.

These changes will add up. One local self-employed photographer has been in business for over 10 years. His frustration is a common one among small business owners: “Everybody thinks I'm rich, but I'm barely getting by.”

And then there's the Patient Protection and Affordable Care Act, also known as Obamacare. In many respects, the cost of paying for the expansion of health insurance is passed onto the employers themselves.

Employers find themselves in a balancing act. Most employers want to provide health care to their employees, but are worried that the cost will be prohibitive. And, as one business owner pointed out, you can't provide jobs—let alone benefits—when you can't afford to stay in business.

A health care law that was marketed as a positive for the economy has turned out instead to be detrimental to it. Overall, 90 percent of respondents in the local survey said that there's not a single government policy or regulation that makes it easier to conduct business.

When asked what governmental policy makes it easier to run his business, one employer in the energy industry remarked, “Are you kidding me? Government policies work against companies.”

The remaining 10% cited things like state historic tax credits or friendly tax policies in other states as things that benefit their companies.

According to Mehan of the Missouri Chamber, in the end there is only one thing government can really do to ease the uncertain economic environment: “Get out of the way.”