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A small business blog featuring tips to help entrepreneurs succeed in the small business world. Topics include family business, human resources, marketing, money, networking, operations, ownership, startup, taxes and technology.
How Changes in Congress Could Affect Small Business
Small business owners were glued to their televisions last week as election ballots were tallied. In the end, 51 Democrats had seats in the House, compared to Republicans 49 seats. The House currently has 230 Democrats and 197 Republicans, with eight elections still determined ties.
Based on a pre-elections survey done by Wells Fargo and Gallup, approximately 75% of business owners believed the congressional takeover by Democrats would have a direct effect on small businesses nationwide. Various issues are expected to come into play.
Trade Promotion Authority
President Bush has ambitiously been seeking renewal of the Trade Promotion Authority, which will lapse in June. Created in 1974, TPA allows the president to negotiate trade agreements. Congress can approve or squash the agreements, but cannot amend them, which protects the agreements from gruelingly being picked to pieces once they were made with the U.S.’s trading partners. The shift in power is expected to slow the President’s progress on getting a renewal approved prior to the lapse, if at all.
Estate Tax/Death Tax have been a long time reformation agenda for small businesses. It is a taxation of 30-50% on assets that are transferred from one generation to the next upon death. In other words, if dad dies, and leaves son a business and property worth $20 million, it will be taxed up to $10 million. If an asset is left to a spouse or a charitable organization, the tax usually does not apply.
A repeal of the tax was on the table, but it is expected to fall to the wayside. There may be a bipartisan approach, but it is not expected to be anything immediate, as the estate tax is not currently a congressional priority.
As far as healthcare, small businesses have been pushing for some sort of reform that will allow them to provide affordable health insurance to their employees. One such hope was association health plans, which would allow small businesses to band together on one insurance policy, even across state lines. The idea is highly supported by Republicans, not as favored by Democrats. It is expected that some option will be extended to small businesses, although association plans will probably not be utilized.
The national minimum wage has been $5.15 per hour since 1997. Based upon calculations, someone working a full-time job at this rate would make just over $10,000 a year, which is the national poverty line. In last week’s elections, six states approved raising the state minimum wage. There are now 29 states, plus Washington D.C., whose minimum wage is higher than the federal.
Raising the national minimum wage is a top priority for Democrats coming into a new congressional year. There is speculation that an increase in minimum wage would harm small businesses and increase the unemployment rate. However, a study by the Center for American Progress found that employment in small businesses grew in states where the minimum wage has already increased. Inflation is another concern for critics, but, truth be told, the pressures and struggles for small business under an increase would be marginal.
The war in Iraq was the number one issue on voters’ minds, according to exit polls. Though it may not be directly connected to small business, it deserves mentioning. The Democratic takeover of Congress and a new Defense Secretary, combined with the people’s dislike of the way the war is being handled, will likely lead to a change in approach and policy.
Democrats want the Iraqi government to take more responsibility for its development and the war on terror in their country. The plan for doing so is to start pulling our troops out of Iraq and handing over the reigns. There have been requests of President Bush to convene an international conference on Iraq. Other suggestions presented may be regional dialogues with our adversaries in Iran and Syria for assistance or developing three sectarian states of the country.
The replacement of Donald Rumsfeld has led most to believe that President Bush is more open to these suggestions. In his address to the country regarding Rumsfeld’s resignation, Bush stated, “Secretary Rumsfeld and I agree that sometimes it’s necessary to have a fresh perspective.”
Changes are inevitably upon the horizon. Whether those changes are positive or negative depends entirely upon perspective. I would like to close with a statement made by Todd Stottlemyer, CEO of the National Federation of Independent Business (NFIB):
“Small-business issues transcend party lines and we want to work with lawmakers from both sides of the aisle to create an environment where businesses can flourish and grow and strengthen the American economy. That’s what NFIB is all about, promoting and protecting the right of our members to own, operate and grow their businesses. The key is providing a climate within which to do that.”
• NFIB: Midterm Election Results In
• Business Week: Small Biz OK With New Congress
• Inc.com: What Does a Democratic Takeover of Congress Mean for Your Company?
• San Francisco Chronicle: Changes From Election May Weaken Bush’s Trade Agenda
• Reuters Election 2006: Economic Impact of Likely Minimum Wage Rise Unclear
• International Herald Tribune: Elections, Rumsfeld Exit Open Door to Change
Related Small Business Buzz Posts:
National Minimum Wage on the Verge of Increasing
Alternative Minimum Tax
New Safety Measures for Imports on the Horizon
SBA Hurting Small Business?
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