An annual analysis of America’s small business environment by Allstate/USA TODAY, released yesterday, found increasing optimism and innovation among small business owners, despite the rising cost of doing business.

The Allstate/USA TODAY Small Business Barometer combines a survey of almost 2,600 small business owners with a comprehensive databank of key public metrics, including past performance, recent growth and increased sales, to measure the strength to America’s small business climate, both nationally and in 25 major metropolitan areas. The barometer then assigns an overall score from 0-100, with the average score being 58.

Overall scores ranged from a high of 63 (considered “strong”) in Cleveland and Nashville to a low of 56 (considered “solid”) in Los Angeles.  Philadelphia scored 57 in the survey.

Here are the key findings:

• Optimism and innovation are surging and 64 percent of small business owners say there has never been a better time to own a small business.
• The small business economy is stronger now than in late 2015, with 55 percent of those surveyed saying their business revenue increased in 2016.
• Despite increased optimism, small business owners still face stress, with 75 percent reporting they faced some or a great deal of stress, about the same as the 2016 survey found.
• Cost is one of the major challenges of owning a small business–and costs are rising. Some 51 percent of owners said the cost of materials and equipment they need are higher this year than last.
• Veterans offer crucial benefits to small businesses, and the survey found that small businesses owned by veterans or who employ veterans tend to perform better than the norm when it comes to past performance, recent growth and increased sales. Owners who hire vets say it’s the right thing to do and that employees with military backgrounds know how to work as a team and have personal traits that are valuable to operating a business, including self-discipline and being on time.
• Younger business owners adapt and innovate more. There’s a widening gap between those owners under 50 and those over 50. The survey found that younger owners are more likely to report their businesses are doing well, are more likely to be optimistic about the future and more than twice as likely to be hiring.
• Female business owners face unique challenges, with women reporting more stress from family pressures and family health than men. Female-owned small businesses tend to make less income than their male counterparts, with 41 percent making annual income of less than $100,000 compared to 21 percent of men’s businesses. And just 10 percent of women’s small businesses make more than $1 million in annual income, compared to 24 percent for men’s small businesses.

For more information, including national results and the scores for 25 major markets, visit http://www.allstate.com/barometer.

If you own a small business, there’s a lot to like in President Trump’s proposed overhaul of the federal tax code for businesses and individuals.

First of all, Trump is proposing to drop the corporate rate from 35 percent to 15 percent, but the new rate would also apply to small businesses and pass-through entities–partnerships, limited liability companies, S-Corps, startups and the like–who now pay taxes through the personal income tax code, where the top rate is 39.5 percent.

Small businesses–mom-and-pop operations, hedge funds, real-estate partnerships, law firms, etc.–would pay a new business income tax rate within the personal income tax code that matches the 15 percent corporate rate under Trump’s proposed business tax overhaul.

The administration said in a statement that taxing small businesses at current high personal-income tax rates stifles them and also stifles tax reform because efforts to reduce loopholes and deductions to the very rich and special interests end up hitting small businesses and job creators as well.  (The administration proposes to eliminate all deductions from the personal tax code except for mortgage interest, charitable giving and contributions to 401-K retirement plans.)

Other proposed reforms include eliminating the alternative minimum tax and the Obamacare tax on capital gains for high earners.

Director of the National Economic Council Gary Cohn and Treasury Secretary Steven Mnuchin said at a press briefing earlier today that the new lower business and personal rates would provide a stimulus for the economy that would lead to significant GDP growth–at least three percent annually and likely more–a huge number of new jobs and an increase in after-tax wages for workers.

Some skeptics weren’t buying the stimulus argument. Jared Bernstein, who was chief economist for Vice President Joe Biden in the Obama administration, told MSNBC: “No tax cut has ever paid for itself through growth.”

Of course, this is the administration’s opening bid in negotiations with Congress, which will ultimately pass a bill for Trump to sign.  And, just as the Bush tax cuts expired in 2013, these cuts would also expire 10 years after passage. That’s because the Senate is likely to pass any tax bill through reconciliation, which would require only 51 votes, but would also sunset the legislation.

Tax-policy experts cautioned that the outline of the Trump plan on its face would jack up the budget deficit and were skeptical of administration claims the tax cuts would pay for themselves with increased economic growth. The conservative Tax Foundation concluded that a 15 percent corporate tax rate would reduce federal revenues by $2 trillion over the next decade.

The Tax Policy Center, a liberal-leaning research group, said Trump’s plan would add $7 billion to the national debt over the next decade, leading to higher interest payments on the debt and driving up interest rates.

To make up for these losses without specific pay-fors, the economy would have to grow by 5 percent, which is unlikely given past performance. According to government data, the annual growth rate has averaged just 2.9 percent since World War II.  That’s because the U.S. has  a mature economy and, as a result, you don’t get big spurts of economic growth like you see with emerging economies.

 

 

 

 

 

 

 

 

 

President Trump signed legislation on April 3 that repealed Obama-era rules that were approved by the FCC in October 2016 to protect consumers. The rules, which had not yet gone into effect, would have required ISPs like Comcast and Verizon to seek consent from their customers in order to share sensitive private data such as financial and health information, social security numbers and web browsing history and location data.

Both the Senate and House voted–largely along party lines with Republicans in the majority–to repeal the rules at the end of March. Critics contended the new rules were onerous, duplicative of FTC rules and unnecessarily imposed additional compliance costs on businesses.

The Trump administration wants the FTC to police privacy issues connected to broadband providers and Internet companies like Google and Facebook. According to FCC Chairman Ajit Pai, prior to 2015, the FTC “was protecting consumers…policing every online company’s privacy practices consistently and initiating enforcement actions.” (In 2015, the FCC stripped the FTC of its authority over ISPs. Pai says he will work with the FTC to ensure that customers’ online privacy is protected.)

The  now-repealed rules were intended to give consumers, and by proxy small businesses who interact with them on the Internet,  control over how their online information was being used.  Now, presumably  ISPs will be able to monitor small businesses and consumer behavior online and use personal information to sell targeted ads.

In any event, the repeal of those rules, at least in the immediate future, is likely to shift the burden of protecting consumer privacy back to small businesses. That means small businesses need to be able to protect consumer data privacy themselves. If you’re selling any goods or services online, you’ll need to take steps to make sure your customers feel safe.

A recent article in Small Business Trends identified a couple things small businesses can do.

For one thing, small business owners who are concerned about their own privacy and the privacy of their business should weigh using a Virtual Private Network (VPN) for company business as well as ensuring that websites used are encrypted. A VPN provides the security measures businesses need. In the same way a firewall protects the information stored in your computer, the VPNs protect data you’re sharing through public networks. This allows you to  run around the proposed security rollbacks to assure your clients their data is safely shared with you.

Secondly, small businesses are encouraged to use an Encrypted HTTPS Protocol. It’s not as complicated as it sounds. The “s” at the end of the older “http” means that all the information passed between your browser and the website you’re connected to is encrypted. That “s” means all the data you share between you and your client is safe, regardless of any changes to privacy laws.

  

When the Trump administration released its budget blueprint for fiscal year 2018 in March, I was surprised to notice that a host of independent agencies–including the Overseas Private Investment Corporation (OPIC)–were having their federal funding totally eliminated.  (Congress, of course, will have the final say, and has yet to weigh in.)

Unlike many foreign aid models, OPIC uses a market-based approach by mobilizing private sector capital for public good. It was established in 1971 and helps American businesses expand to emerging markets in Africa, South and Central America, as well as Mexico and the Caribbean.

It works like this:  OPIC provides direct loans and guarantees, in addition to risk insurance, in cases where commercial financial institutions are unwilling or unable to lend. Put another way, OPIC facilitates investments that would not likely happen otherwise.

OPIC has received bipartisan support and pursued its mission on a self-sustaining basis at no net cost to American taxpayers for the past 39 years, according to a report in Forbes on March 31 by Willy Foote, founder & CEO of Root Capital. Root has worked with OPIC for the past seven years to connect small coffee growers in Latin America and Africa to global markets.

Last year,  OPIC returned every cent of funding it received from the feds plus $239 million it earned as income. During the Obama administration, OPIC generated $2.6 billion in deficit reduction.  Foote says he can’t understand why Trump wants to cut an agency that makes money for taxpayers.

Foote is not alone in his assessment. “I understand why some Americans watch their tax dollars going overseas and wonder why we’re not spending them at home,” said Bill Gates, in an article in TIME last month. “These projects keep Americans safe. And by promoting health, security and economic opportunity, they stabilize vulnerable parts of the world.”  Sen. Lindsey Graham (R-S.C.) has likened support for OPIC as akin to “buying national security insurance.”

Private investors are understandably wary of working with enterprises in fragile or failed states, Foote writes, “but when capital flows to these small businesses and local entrepreneurs, lasting peace becomes more probable.” Foote fears such communities are more likely to backslide into violence if OPIC is eliminated.

For five decades–under both Democratic and Republican administrations–OPIC has shown how a market-based model can responsibly invest in businesses and jumpstart economic development that likely wouldn’t occur otherwise, said Foote, adding that OPIC “achieves this while supporting American enterprises, advancing the country’s foreign policy objectives and providing steady financial returns for taxpayers. This is a model that should be expanded not eliminated.”