Guest Column: Washington’s disconnect with small business

August 25, 2010

By Karen Kerrigan

Now, GDP data released at the end of July made clear that anyone hoping the recession is ending is engaged in wishful thinking. The economy grew by a weak 2.4 percent. Yet, even with a 9.5 percent unemployment rate and an economic future Federal Reserve Chairman Ben Bernanke calls “unusually uncertain,” the Obama administration and Democrats in Congress insist on pursuing job-killing policies.

The main victims are America’s 25 million small businesses, which create seven out of every 10 new jobs. Obama’s plan to “soak the rich” by letting the Bush tax cuts expire on those making more than $200,000 (individuals) and $250,000 (households) a year is a dagger aimed at their heart. Fully 65 percent of tax filers making more than $200,000 a year are small business owners. And 93.4 percent file their business return on their personal tax returns. If the tax cuts expire, we won’t be punishing the rich, we’ll be killing jobs.

Calling small business owners “rich” ignores the way they save and grow. The simple fact is, if you don’t have money, you can’t hire workers. Taxing these so-called “rich” small business owners means fewer jobs will be created, and fewer workers will be hired.

Then, there are the miles of red tape Washington is piling on small business. Obama’s health care and financial system overhaul added thousands of pages of regulations not just on health insurers and Wall Street, but Main Street. The Obama administration has now admitted in court filings that the health care mandate for businesses to insure employees or pay a “fee” is just what small business owners said it was all along—a tax. Do we really want to raise taxes on job creation during a recession?

Then, there is the way Washington plays favorites with big businesses that affects small business, whether as customers or competitors. A good example is the way large express delivery companies are treated. Under current law, Federal Express employees are regulated as aviation employees under the Railway Labor Act (RLA), even though most drive trucks and deliver packages. How can a worker driving a truck be considered an “airline employee” and regulated the same as an airline pilot? However, employees who drive for every other intermodal delivery firm in the country are treated as trucking employees under the National Labor Relations Act. The status quo favors FedEx because the RLA lets bureaucrats intervene to stop work interruptions in “airlines.” This distorts the free market for FedEx’s competitors and for small businesses seeking supply chain solutions.

FedEx should not be given special advantages against small businesses seeking to compete for a piece of the express-delivery market. And as UPS and FedEx jostle for small-business customers, managers shouldn’t have to guess how the legal treatment afforded to FedEx might affect their decision of doing business with their main competitor, UPS.

To its credit, the House of Representatives has passed a bill to fix this legal loophole as part of the Federal Aviation Administration modernization bill. It ensures all express delivery employees doing the same jobs are treated the same under the law. The Senate should stop stalling, and pass the House version of the FAA bill before it adjourns.

Increasing taxes on our nation’s job creators and burdening them with regulatory costs is dragging the economy down. Treating companies differently through regulatory preferences and carve-outs adds to uncertainty and distorts the market. Washington needs to play less politics, less partisanship and focus on growth-oriented policies. Only then will the economy be restored along with a healthy level of job creation by small businesses.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council, a prominent and respected advocacy and research organization.

From the Aug. 25-31, 2010 issue

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