Small Biz: High Hopes for New Congress
The 110th Congress convened for the first time on Jan. 4, with Democrats heading the small-business committees in both the House and Senate. Senator John Kerry (D-Mass.), the new chair of the Senate Committee on Small Business and Entrepreneurship, introduced tax-credit legislation that would help small businesses lower their health-care costs and encourage more small companies to offer health coverage.
Kerry also introduced legislation to reform the Alternative Minimum Tax (AMT), to help increase loan, contracting, and entrepreneurial development opportunities for minority business owners, and he introduced proposed improvements to the Small Business Administration (SBA) disaster loan program (see BusinessWeek.com, 5/11/06, "The SBA's Iffy Future").
On the House side, Nydia M. Velázquez (D–New York), chair of the House Small Business Committee, introduced two measures aimed at helping reduce the complexity of the tax code and increasing fairness for small companies. Her Small Business Tax Fairness and Simplification Act of 2007 would work to reduce paperwork for home-based businesses, ensure that the Tax Code accurately reflects the modern operations of a business, encourage investment in small businesses, and make it easier for small businesses to file their taxes.
Leveling the Field
Velázquez also introduced legislation to remove a barrier that has prevented small companies from receiving returns on their business checking accounts. The Business Checking Fairness Act of 2007 would grant entrepreneurs greater freedom over their finances (see BusinessWeek.com, Winter, 2006, "New Small-Biz Agendas in Congress").
The quick action in the House and Senate reflect only slightly different priorities: Both look to increase financial freedom and competitiveness for small businesses. "Our nation's small businesses have consistently fallen victim to unfair practices over the past several years, particularly when it comes to competing with their larger counterparts. As the chair of the committee, simplifying the tax code and expanding fairness for entrepreneurs are priorities for the 110th Congress," Velázquez said in a statement.
Health care, which is often listed as the top concern for small-business owners (see BusinessWeek.com, 11/6/06, "A Small Biz Health-Care Headache"), will undoubtedly continue to be a contentious and difficult issue. Kerry's Small Business Health Care Tax Credit Act of 2007 would provide small companies with fewer than 50 employees a refundable tax credit to help with the cost of health insurance for employees earning $5,000 to $50,000 a year. To receive the credit, employers must pay at least 50% of the health-care insurance premium.
"Good Interim Step"
Still, the health-insurance burden for small-business owners is not going away any time soon. "The federal government has been able to nibble at the edges but hasn't been able to break through the gridlock on health care. This is something I know [Kerry] will try to address," says Giovanni Coratolo, executive director of the Small Business Council of the U.S. Chamber of Commerce.
Kerry hopes his legislation will at least plug the hole temporarily. "When it comes to small business, owners should focus on what they do best—creating jobs and contributing to the economy—instead of worrying about whether they can afford to provide health benefits. This legislation to help small businesses is a good interim step toward helping all Americans by lowering health-care costs," Kerry said in a press release.
Revealing his other top priorities for the next two years, Kerry also introduced legislation to reform the AMT, a tax designed to target high-income individuals that can be a drain on small-business owners' finances. Kerry's plan to reform the AMT expands and extends the individual AMT exemption amount for 2007 and allows nonrefundable credits against the AMT for 2007.
The proposed Senate legislation also aims to help increase loan, contracting, and entrepreneurial development opportunities for current and potential minority business owners. The introduced legislation would establish an Office of Minority Small Business Development at the SBA to give minority entrepreneurs an advocate in the agency. It also would create a Minority Entrepreneurship and Innovation Pilot Program to foster a passion for entrepreneurship in high-achieving young people at historically black colleges and universities, Hispanic-serving institutions, and tribal colleges.
Senator Kerry's bill also would create the Minority Access to Information Distance Learning Pilot Program, which would enable distance learning programs for small-business owners. And it would reauthorize the Socially and Economically Disadvantaged Business Program, which increases small-businesses' ability to compete with larger firms by providing a Price Evaluation Adjustment, or the ability to put in a 5% to 10% higher bid than a competitor, depending on the contract, and still be considered for the job.
Despite consistent SBA budget cuts over the last six years, leaders in the small-business community are optimistic about the 110th Congress' dedication to their constituency. "From a funding standpoint, this is a very difficult time, but everyone wants the opportunity to do better. We can all improve the services we're offering," says Ken Yancey, chief executive officer of small-business mentoring program SCORE.
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