The financial crisis that began on Wall Street and spread to Detroit and corporate America has officially found its way to Main Street. The tsunami battering our economy has now breached the largest and most important segment of our economy—America’s entrepreneurs. Small business owners are hunkering down, worrying about sales, cutting back on investment and growth plans, and even beginning to cut jobs.
The impact can now be seen all across the American landscape and in town after town here in New Jersey. Because not only are small businesses the major source of new jobs, they’re also the lifeblood of their communities. Small business owners support local charities, community groups, youth sports, television, radio, newspapers and more.
But when Congress crafted and President Obama signed an economic stimulus package designed to pull our economy from the brink, very little was done to support our small businesses. While ladled with pork and bailout cash for bureaucracies, the recovery plan targets precious few resources on small business. This snub will be felt in New Jersey with more than 51 percent of the state’s workforce employed by a small business.
Despite all the speeches and soaring rhetoric about helping hardworking small business owners, when you look at the facts, the stimulus plan supported by a majority of New Jersey’s Congressional delegation does very little for small employers here at home that are struggling.
Certainly, some initiatives are a step in the right direction. The proposal includes an extension of increased small business expensing for 2009, relief from the Alternative Minimum Tax, and support for Small Business Administration lending programs. These provisions are a good start, but in the current economic climate, we’re asking small business to ride out a Category 5 storm with little more than a life vest.
Entrepreneurs in New Jersey need real support and significant incentives for the investments necessary to fuel an economic recovery. These incentives must be coupled with significant short-term tax relief to help small businesses and their customers through the current economic crisis, and then to build a sustained recovery in the future.
To do that, Congress needs to focus on policies that reflect what small business owners and their employees actually need, as well as solutions that keep jobs here today, and create new jobs for tomorrow.
The best way to inject immediate cash into our economy would be a six-month payroll tax holiday for both small business owners and their employees. Payroll taxes are often the highest taxes paid by both groups, so this relief will provide real and immediate help. Instead of waiting for relief on next year’s tax bill or navigating a complex set of deductions and credits, a payroll tax holiday would provide a quick and tangible boost to small business balance sheets and employee paychecks. Unlike the recently approved federal plan, a payroll tax holiday would pass the test set by most economists for a successful stimulus: Quick, efficient, significant and temporary. With perhaps the exception of its price tag, one would be hard pressed to suggest the recently passed federal stimulus met any of those criteria.
A payroll tax holiday coupled with incentives to expand and invest is the one-two punch our economy needs to get back on track. To work, incentives such as increased small business expensing must be sustained and meaningful. The current expensing limits of $250,000 should apply in both 2009 and 2010. In addition, expensing should include investments in changes to business property, not just the purchase of new equipment, as is current law.
New Jersey’s small businesses are on the front lines every day, the risk takers and job creators in our economy. Wall Street may have gotten us into this mess, but it will be the small business community—the largest and most dynamic segment of our economy—that gets us out. But as small businesses struggle with an economic mess they didn’t create, our elected representation in Congress has yet to give them the tools they need to drive a recovery.
With the right combination of relief and incentives, small business can lead us out of this recession and help create a strong and lasting economic recovery. Congress swung and missed on its first at-bat. It’s time for them to step back up to the plate and produce a plan that provides real stimulus for Main Street.
Laurie Ehlbeck, Esq. is the New Jersey State Director of the National Federation of Independent Business.