In the aftermath of the Tuesday night drama surrounding the passage in the House of the Senate-generated proposal to resolve the fiscal cliff, thousands of small business leaders are revamping their strategic growth, hiring and investment plans for 2013. While several leading government and small business analysts are providing solid advice on small business tax, hiring and investment strategies, this period of market certainty may be short lived as another fiscal crisis looms.
Some Republican leaders in the U.S. House and Senate, at this point, seem determined to engage in a repeat of another ill-conceived fiscal cliffhanger associated with what, for years, had been the routine elevation of the debt ceiling by Congress. While no responsible leader disputes the fact that the federal budget deficit needs to be reduced, political conflict centers on proposed budget cuts.
In other words, one side’s 'essential service' is another side’s 'pork barrel spending.' Early reports, including recent opinion editorials by Senate Minority Leader Mitch McConnell, of Kentucky, and U.S. Senator John Cornyn (R-TX), point to another ‘cliff-style’ confrontation this spring. Until 2011, Congress had routinely elevated the national debt ceiling as it was viewed as a responsible, pro forma matter to ensure the United States government paid its debt obligations. In 2011, after the election of a Tea Party-led Republican House, raising the debt ceiling became, for some, a way to challenge President Obama. The result was a first ever downgrade of America’s credit rating—from triple-A to AA—and a drop in the stock market.
It’s this incessant political uncertainty that, at least until the 2014 mid-term elections, is likely to remain in play for the foreseeable future. Market uncertainty dampens investor confidence which, in turn, prevents entrepreneurs from being able to plan based on solid economic factors such as stable interest rates and access to capital. While some business leaders, including the Business Roundtable, are working to prevent a political battle over the debt ceiling that would stall private investment, for now, this is the climate that confronts small business leaders as they work to launch or expand their businesses in 2013.
This morning, the U. S. Labor Department released its December jobs report which reported 155,000 new jobs were added in December, for a total of 1.84 million jobs created in 2012. The unemployment rate was unchanged from last month’s adjusted rate of 7.8 percent. In an MSNBC interview after the release of today’s report, Alan Krueger, an economist who chairs the President’s Council of Economic Advisers, shared this analysis in response to a question that suggested the growth rate, to date, was anemic compared to previous economic recoveries, “No, that’s absolutely wrong. Twice as many private sector jobs have been added to this point in the recovery as in the previous recovery. It’s just that we’re digging ourselves out of a very deep hole. It’s important that we build on this progress, we’d like to see faster job growth and we are seeing job growth in some of the sectors that were very hard hit by the crisis, in particular we’ve seen construction growth in December. On the other hand we’re still losing a lot of jobs in local governments. We lost 11,500 teacher jobs last month and 300,000 teacher jobs over the last three years. So, this recovery is facing different kinds of headwinds than we’ve had in past recoveries. Then, on top of that, we have slower population growth and an older population which is going to be a factor for the U.S. going forward. We are making steady progress as today’s report and, frankly, reports over the years have shown.”
In the short term, small business leaders can take cues from leading sources that are focused on short- and long-term business development strategies designed to ensure that, despite our national political climate, their financial bottom lines will not be undermined by competing political interests.
Here are some useful tax and economic policy sources that are focused on helping small business leaders make the year 2013 a profitable one.
- Jumpstart Our Business Startups Act – This under reported legislation could become a useful tool for small business owners seeking access to capital as it includes a provision that allows startup businesses to sell equity to pools of online investors. To date, the Securities and Exchange Commission has provided some guidance on the JOBS Act but detailed rules have yet to be issued. This law is one of the few, promising pieces of legislation produced in the 112th Congress as it reflects the compilation of six House bills that gained bipartisan support.
- Small Biz Gems in the Details – Depending on the focus of your small business, legal and tax advisers for small businesses may find investment incentives buried in the essential, ‘must read’ details of the final agreement. Dean Zerbe, a tax adviser and contributor to Forbes who analyzes tax policy for business, wrote his assessment of the fiscal cliff agreement. Comments like these should spark further investigation by small business owners and their accountants, “The increase in the top rate, the AMT relief provided for 2012 tax year and the hidden tax increases – all combine to make it possible that many small and medium businesses that weren’t eligible for business credits thanks to AMT limitations in 2011 will now potentially be able to take advantage of these dozens of credits. In essence, a backdoor opportunity for small businesses…The time is now – before filing 2012 tax returns — for business owners to have a sit down with their accountants and focus on all of these business credits.” The final agreement struck by Congress limits tax increases to personal income above $400,000 for individuals, and $450,000 for couples. For those who would like some idea on what all of this means for your household, the non-profit Tax Policy Center has created a tax calculator, although professional advice from an accredited tax adviser is recommended.
- Special Tax Breaks for Small Businesses – While competing voices are weighing in with analysis on the expected economic impact of the fiscal cliff agreement, analysis released by congress’ Joint Committee of Taxation is sparking spirited analysis by independent sources. A report in the Los Angeles Times opens with this, “In the last-minute dealmaking to stop the nation from tumbling over the so-called fiscal cliff, Congress and the White House decided not to spare most people from a hike in Social Security payroll taxes. But they did find room for billions in special tax breaks for rum makers, racetrack owners, railroads — and Hollywood studios.” And, finally, if your business relies on employees riding mass transit or if you’d like to know more about the ‘NASCAR Loophole,’ you’ll want to check out this report that Black Enterprise describes as “5 Unusual Provisions.”