Small-business owners are bracing for changes–and, in some cases, higher costs–under the current House GOP plan to replace the Affordable Care Act (ACA), the Wall Street Journal reported yesterday.

As I write this, the bill–called the American Health Care Act–is being modified to address the objections of the House’s most conservative Republicans. It’s unclear what the last-minute changes are and what, if any, impact, they will have on small business. A vote is scheduled for 7 p.m. It’s anybody’s guess whether the bill will make it out of the House.

As things stand now, the House healthcare bill would eliminate mandates imposed on businesses by the ACA, which was passed by Congress on March 23, 2010. For example, firms with 50 or more full-time workers would no longer have to provide health insurance to employees. The downside of that, of course, is that might make it more difficult for such companies to attract skilled talent if they opt not to provide health insurance. Studies have shown that company-provided health insurance is a perk which makes it easier for companies to attract and retain employees.

Another factor is that the current version could result in higher healthcare premiums for those firms with older workers and lower costs for those with younger employees, the Journal reported.

“Nearly 25% of owners of new businesses with employees were 55 or older in 2014,” according to the Kauffman Foundation, which studies entrepreneurship, while another 29% were between the ages of 45 to 54.

The Journal reported that 55% of firms with three to 199 employees offered healthcare benefits to their workers last year, according to the nonprofit Henry J. Kaiser Family Foundation, with larger firms more likely to offer these benefits.

For firms with 50 or fewer employees, the biggest proposed change under the House GOP plan would be a relaxation of rules under the ACA that limit how much more insurers can charge older workers. (A recent analysis of the House plan by the Congressional Budget Office said it would sharply increase insurance premiums for older workers.)

A St. Louis veterinarian, Wayne Hause, told the Journal that change “would probably destroy our ability to provide good health care to the majority of our workers.” Hause has 40 employees, and seven of the 19 employees on the practice’s health plan are 50 or older, Hause told the Journal.

The current GOP health plan would also end a tax credit available for lower-wage small businesses that buy coverage through the federal Small Business Health Options Program, which created marketplaces for small firms to buy employee health plans, the Journal said.

Other small-business owners and entrepreneurs could also be affected by changes aimed at individual coverage. The House GOP plan could raise premiums by 15% to 25% for individuals in 2018, compared to rates without the bill, according to CBO estimates, which also show that fewer people would have health coverage.

That could discourage some would-be entrepreneurs from starting their own businesses, studies suggest. Gareth Olds, a Harvard Business School professor, told the Journal: “If people lose insurance, they are much less likely to start a business.” Olds has studied the impact of health insurance on firm formation.

President Trump’s proposed 2018 budget would cut the Small Business Administration’s budget by $43.2 million, or a 5 percent decrease from the 2017 annualized continuing resolution.  The SBA is currently funded at $869.7 million.

The SBA ensures that small businesses have the tools and resources needed to start and grow their operations, maintain U.S. competitiveness and help grow the economy.

The Office of Management and Budget (OMB)  says the agency will be more efficient because reductions in spending are being targeted at “redundant programs” and eliminating programs that deliver services which OMB says are better provided by the private sector.

One area, in particular, that could absorb the brunt of the cuts, is the elimination of SBA grant programs such as PRIME technical assistance grants, Regional Innovation Clusters and Growth Accelerators.  The feds  currently appropriate $12 million towards the programs.

OMB says the private sector provides similar, presumably  more effective  mechanisms to foster local business development and investment.

Trump’s budget would maintain $28 million in microloan financing and technical assistance to help serve, strengthen and sustain the smallest of small businesses and startups. The proposed budget would also support more than $45 billion in loan guarantees to help small businesses get affordable capital to start or expand their businesses.

All told, OMB says the cuts would actually strengthen SBA’s outreach center programs by reducing duplicative services, coordinating best practices and investing in communities that would benefit from SBA’s business center support.

Congress must approve the White House’s proposed budget, which many critics have already said is DOA on Capitol Hill. The budget contains big increases for defense, homeland security and veterans affairs.

 

 

 

 

 

 

House Republicans and President Trump both want to reduce the corporate income tax and replace it with a business cash-flow tax.  Supporters say the tax would boost investment and economic growth.

One of the goals is to make “Made in America” products more competitive abroad. If adopted, it would impose new taxes on imports and exempt U.S. exports from federal corporate taxes. The 20 percent tax would be applied to a business’ gross receipts and subtract gross expenditures other than interest expenditures.

Some experts say the tax, as currently envisioned, may not even be legal; others say it would hurt consumers.

According to a recent post by Joel P. Trachtman, a professor of international law at Tufts University’s Fletcher School of Law and Diplomacy, the cash-flow tax would affect imports and exports differently. All companies whose products are consumed in the U.S.–regardless of where they are made–would face levies, said Trachtman. Only U.S. businesses would be allowed to deduct expenses. Thus imports would be taxed the full 20 percent rate while exports would be excluded from U.S. taxation.

Such border-tax adjustments are permitted under World Trade Organization (WTO) rules, but only for taxes on a product, such as a sales tax, as opposed to income taxes.

Whether the border-tax adjustments are deemed legal by the WTO will depend on a key interpretation, says Trachtman: “Is the tax in question an income tax or a tax on a product? It does seem possible to characterize the new tax as a tax on a product.” He also notes the fact that imports would face a 20 percent tax on their price with no deductions while domestic producers would be able to deduct most expenses–including payroll–from the tax base could also make the import border adjustment illegal under WTO rules.

Trachtman said if such a plan were passed by Congress and signed by Trump the plan would likely lead to lengthy litigation at the WTO. He said a “likely” ruling that the tax is an income tax and is applied in a discriminatory matter, would mean that exempting exports would be considered an illegal subsidy and taxes on imports an illegal tariff. “This could lead to trade sanctions against the U.S. and open the door to counter sanctions and the start of a trade war,” said Trachtman.

I don’t see how that is beneficial to the U.S. economy.

Moreover, a report published on January 26 by Cowen Research said some marquee U.S. brands would be hurt big-time by a border-tax adjustment.

Apple, the world’s largest company, would see a big hike in its tax bill because it won’t be able to deduct the expense of assembly abroad. Constellation Brands, the largest beer importer in America, will not be able to expense the cost of goods it brings across the border, like its Corona brand from Mexico. Gap would be another big loser, since Cowen estimates that between 50 and 80 percent of the retailer’s cost of the goods it sells comes from abroad.

These are just a few of the many companies whose earnings could come under attack by the GOP tax plan. We shouldn’t expect them to sit idly by.

 

 

 

 

 

Apparently, this is a thing. During the winter, which officially began yesterday,  can be a challenging time for many small businesses. That’s because winter can bring on a form of depression called “Seasonal Affective Disorder,” or SAD. The condition can range from the blahs to a serious mental health condition and should be taken seriously, according to a recent post on the website SmallBusiness.com.

According to the National Institute of Mental Health, symptoms of SAD include:

• Sad, anxious or empty feelings
• Feelings of hopelessness and/or pessimism
• Feelings of guilt, worthlessness or helplessness
• Irritability or restlessness
• Loss of interest in activities you used to enjoy
• Fatigue or decreased energy
• Difficulty concentrating, remembering details and making decisions
• Difficulty sleeping or oversleeping
• Changes in weight

Winter-related disorders are still a mystery to scientists who study them, but there is general agreement about one form of treatment, and that is light, or more light. And this is where small businesses can proactively assist their employees in coping or forestalling the onset of SAD, thus enhancing productivity.

For example, simply opening blinds to let the sunshine in an office might do more than make you feel better. In fact, it might even boost your bottom line. A study by the Lighting Research Center at Rensselaer Polytechnic Institute found that employees who sit near windows during winter months were more productive than those in interior offices.

The Whole Building Design Group (a program of the National Institute of Building Sciences) recommends employees work more effectively in spaces where there’s an emphasis on the quality of light and color. The good news is you don’t have to build a new office to incorporate some of these ideas. A few tweaks can make your office more conducive to a positive work environment for you and your employees.

If you reconfigure your office, here are some tips to keep in mind:

• Allow sunlight to penetrate as far into a room as possible.
• Avoid placing furniture or cubicles in places that block light to interior spaces.
• To control glare and filter daylight at different times of the day, use shades or blinds inside and trees or overhangs outside.
• Avoid sunlight beaming directly into continuously occupied spaces, but having a few “sun spots” in shared or public  venues are psychologically beneficial.

For more information about SAD, check out the websites of the American Academy of Family Physicians and the Mayo Clinic.

 

 

 

 

Thanks to President Obama, Donald J. Trump is about to inherit an economy still on the upswing. The jobless rate for November was the lowest since August 2007 and 15.6 million private sector jobs have been added since early 2010, the government said on Friday.

A report last month by the Kauffman Foundation found a sharp uptick in small business survival rates in the last year. (The 2016 Kauffman Index of Main Street Entrepreneurship measures U.S. entrepreneurship across national, state and metro areas. It captures business activity in all industries and is based on a national sample of roughly 900,000 responses each year and the universe of all employer businesses in the U.S. in a dataset that covers approximately 5 million businesses.)

The index relies on three indicators to measure entrepreneurship:

• The rate of business owners in the economy, calculated as the percentage of adults owning businesses as their main jobs, who are overwhelmingly represented by small business owners.
• The survival rate of firms, calculated as a percentage of the firms that remain in operation throughout their first five years.
• The established small business density, measured as the ratio of established (five years or older) small (fewer than 50 employees) businesses to the total number of firms.

U.S. Census Bureau statistics show that established small businesses represent almost 68 percent of all employer firms in the country.

Some of the results were surprising.  For the first time since the recovery began, Main Street entrepreneurship activity is at higher levels than those recorded before the onset of the Great Recession, the Kauffman Index said. The increase was primarily driven by a jump in business survival rates, which reached a three-decade high of 48.7%, meaning almost half of new businesses are making it to their fifth year of operation.

On the other hand, U.S. small businesses have gotten smaller over the last 20 years. The smallest of those small businesses–companies with fewer than five employees–make up 53.1% of all established small businesses, up from 49.5 percent in 1996.

Among the 25 larger states, the five with the highest Main Street entrepreneurship activity were Minnesota, Wisconsin, Massachusetts, Colorado and Pennsylvania. Among the larger states, the rate of businesses surviving through their first five years ranges from 44% in Arizona to 53.3% in Pennsylvania.

The five metros with the highest Main Street entrepreneurship activity were Pittsburgh, Boston, Portland, San Francisco and Washington, D.C. The first-five-years survival rate of businesses in the 40 largest metros ranges from an estimated 39.9% in Orlando to 54% in Boston.

For more information, visit http://www.kauffman.org/microsites/kauffman-index/reports/main-street

 

 

As far as I can tell, most candidates in Pennsylvania running for the U.S. House of Representatives or the U.S. Senate aren’t talking much about where they stand on small business issues.

Oh, if asked by a reporter, they’ll mouth platitudes about how important small business is to job creation (which it is) and how we must do more to “incentivize” entrepreneurship (which is necessary). But, let’s face it, the issue isn’t really sexy and doesn’t exactly trend well on Facebook or Twitter. It’s much easier to smear your opponent or talk about  terrorism and illegal immigrants, often by conflating the last two issues.

In the interest of helping smallbiz owners become more informed, I’ve done a little research on the topic. (I’m familiar on the subject and formerly wrote a column about small business for the Philadelphia Daily News.)

Do you even know which senators sit on the Senate’s Committee on Small Business & Entrepreneurship or which representatives sit on the House’s Small Business Committee? Do you know that not a single Pennsylvania representative or senator sits on either committee? (If not, shame on you.)

I thought for sure at least one of Pennsylvania’s  elected federal officials  would turn up on a small business committee in Congress, given the  most recent analysis by the Kauffman Foundation, a widely respected think tank that studies entrepreneurship in the U.S.)

According to Kauffman’s recent index, Startup Activity Among Large States, which focused on new business creation activity and people engaging in business startup activity, Pennsylvania ranked 24th worst out of 25 states that were analyzed. (Only Wisconsin fared worse.)

Among the 40 largest metropolitian areas in the country, Philadelphia ranked 34th worst (in 2015, it was only 32nd worst)  and Pittsburgh was dead last, same as last year.

Perhaps you should email your representative or senator and find out why this is the case, and where they stand on issues affecting small business. Ask them to what they are planning to do to to help small businesses and entrepreneurs in your community. Don’t be afraid to demand specifics, such as what small business legislation have you introduced, sponsored or co-sponsored that was passed by the Congress and became law.

I’d be interested to hear back from you on whether they responded to you. Not to worry, I’ll factcheck them. But don’t delay, because the election is just a month away.

 

 

 

 

 

When Republican Presidential nominee Donald Trump unveiled his tax plan in Detroit in early August, he proposed a reduction in the corporate tax rate from 35 percent to 15 percent for all businesses. But that changed yesterday when he outlined a new tax plan in a speech to the Economic Club of New York.

Trump rolled back his earlier proposal to reduce corporate taxes and a number of news organizations–Vox Media, CNN and the New York Times, among others–suggested that some small businesses will get a smaller tax break than envisioned under Trump’s earlier tax plan.

Trump still proposes a 15 percent tax on corporate income, but the Times noted that the 15 percent rate would no longer apply to business income reported on personal taxes, typically on Schedule C, which is the way many small businesses report their income.

As Vox noted,  Trump had previously proposed subjecting C-corporations, which currently pay the corporate income tax, and “pass-through” entities, whose earnings are distributed to shareholders who then pay ordinary income tax, to his new 15 percent corporate tax.

Trump’s new tax plan, Vox reported, “does away with this [pass-through] element taxing only C-corporations at the 15 percent rate and having pass-through companies instead merely benefit from the lower individual rates.” (The current top individual rate would be reduced from 39.5 percent to 33 percent, a much smaller decrease than the proposed new corporate tax rate.)

According to the Tax Foundation, pass-through businesses earn more net income than C-corporations and the number of pass-through businesses–which include sole proprietorships, partnerships and limited liability companies–has nearly tripled since 1980, while the number of C-corporations has declined.

Vox suggested that if pass-through entities were included in the proposed 15 percent corporate tax rate, it would have amounted to a “massive tax cut for the rich” because about 69 percent of pass-through income goes to the top 1 percent of earners.

The National Federation of Independent Business (NFIB), which bills itself as the leading small business association, is apparently on board with the new changes in Trump’s plan.

In a press statement attributed to to NFIB’s president & CEO, Juanita Duggan, she said: “We strongly support Mr. Trump’s proposal to create a single business tax rate that would create parity between small businesses and their larger competitors. We are also strongly supportive of his plan to reduce the tax burden on small businesses and simplify the code.”

So, to sum up, Trump’s new corporate tax rate may create more parity between corporations and some small businesses, but certainly not all small businesses.

 

 

 

 

 

The end is in sight for legislation that will make it illegal for companies to put so-called “gag orders” in their customer contracts to prevent customers from sharing their honest opinions with others, the website Consumerist reported on Monday.

On September 12, by a simple voice vote, the House passed the Consumer Review Fairness Act, a bipartisan bill that would void any non-disparagement clauses in consumer contracts and gave the FCC and state attorneys general authority to take enforcement action against businesses that attempt to use such clauses to silence the voice of consumers.

Similar legislation was passed unanimously in the Senate in December 2015. A reconciliation of the House and Senate bills is expected to pass easily and sent to President Obama, who has indicated support.

A number of businesses have inserted provisions into contracts and terms of service declaring that if the customer writes or says anything negative about the transaction–such as a review on Yelp–the company can seek damages.

The Consumerist reported the case that brought the issue into the spotlight involved a failed attempt by online retailer KlearGear to hit a customer with a $3500 penalty after she wrote a truthful but negative review of the company. A Texas petsitter sued a customer for $1 million after a negative review on Yelp.

Attorney Paul Alan Levy from Public Citizen, who was involved in both the KlearGear and Texas petsitter cases, told  Consumerist the legislation was a win-win for both consumers and small businesses.

It’s good  for small businesses, he said, “that do not need to paint a false picture of themselves by suppressing truthful criticisms in order to secure more customers, and for businesses harmed by competition from those businesses that do need to paint a fraudulent picture of themselves by using non-disparagement clauses.”

 

When you think about where the fastest-growing private companies are–and the jobs they’re creating–the Philadelphia region is probably not top of mind.

That may be changing. According to an analysis of Inc. Magazine’s latest Inc. 5000 list of fastest-growing private companies on its website yesterday,  the Philly metro area ranked No. 7 with 151 companies on the list, which was more than Boston, San Francisco, Seattle, Austin or Denver, all of whom are considered more well-known startup hubs.

And, according to Inc., this isn’t a one-year phenomenon. The magazine said that since the end of 2012, the fastest-growing private companies in the Philly metro area have added a whopping 57,000 new jobs, ranking it the No. 2 in overall job growth.

It’s unclear what has accounted for this hiring binge, but Inc. suggests that a lower cost of living and cheaper wages (in addition to good location and abundant amenities) are factors likely driving the hiring binge.

There are, however,  several caveats with regard to the jobs data, which is self-reported by the companies. As Inc. noted, the head counts include human resources companies, which may be overrepresented as employees on the payroll might not include actual company employees. Put another way, these companies tend to skew the numbers.

Inc. said the head counts are self-reported by each company as of the last day of 2015 and Inc. compares the data with that of year-end 2012. The definition of employee also includes seasonal workers receiving any level of benefits, such as basic paid national holidays.

 

 

 

Democratic presidential nominee Hillary Clinton rolled out a list of proposals today to make it easier to start a small business, get financing, file taxes and offer health care to employees, in addition to providing tax relief.

Clinton’s proposal directly addresses two major complaints of small businesses:  Too much red tape and too many taxes that combine to stymie growth of small businesses.

Details of the proposals are outlined on the campaign’s website at http://www.hillaryclinton.com and were to be publicly unveiled by vice presidenrtial nominee Tim Kaine at a roundtable in Colorado. Clinton will speak to small-business owners via conference call while fundraisng in California.

Among other things, the plan would:

• Push states to make it easier and cheaper to start a small business by streamlining unnecessary licensing programs. Those that do will receive federal funding to support innovative programs and offset lost licensing revenue.
• Provide incubators, mentoring and training to 50,000 entrepreneurs and small businesses in underserved communities.
• Allow four million small businesses with gross receipts under $1 million to take advantage of “checkbook accounting.” The premise here is that filing taxes for these small businesses should be as simple as maintaining a checkbook. Clinton would also simplify accounting and tax filing for small businesses with $25 million or less in gross receipts, by replacing complicated rules and letting businesses under this threshold choose the simpler “cash accounting” method.
• Clinton also said she would work to create a new standard deduction for small businesses, similar to the one currently available to individual filers, allow small business to immediately expense up to $1 million in new investments, rewarding them for expanding factories or buying new equipment to boost growth and hiring and quadrupling the start-up tax deduction to lower the cost of starting a small business.
• Simplify and expand the healthcare tax credit for small employers in Obamacare so that more employers can provide affordable healthcare to their workers.

The Clinton campaign said the proposals would be paid for by closing corporate tax loopholes that enable corporations to outsource jobs and offshore profits.

Republican presidential nominee Donald Trump has proposed capping the corporate tax rate at 15 percent and placing a moratorium on all new federal rules and regulations until their impact on business can be evaluated.