No one goes into business because they like filling out government paperwork, yet Washington, and to a lesser extent, Colorado, have been engaged in a great effort to pile on new regulations, most of which would harm small businesses more than big ones.
Small business is no small matter. According to the Census Bureau, 99.7 percent of U.S. businesses are small employers and these small businesses employ about half of all private sector employees. Small businesses are responsible for more than 60 percent of net new jobs in the last two decades.
Yet in recent years small businesses in Colorado and nationally have faced a host of new hurdles to leap before they can open their doors or make their websites go live. The three hardest for small businesses to clear are federal regulations, federal taxes and the rising cost of health insurance.
Regulations
One such federal proposal would drastically expand the Clean Water Act, for the first time giving the federal government jurisdiction over private ponds, seasonal streams, usually dry creek beds and other bodies of water. If the White House approves the rule, farmers and local business owners will have to apply to the EPA to do anything on their own land that might affect a nearby water source. It’ll add tens of thousands of dollars to small projects and lead invariably to potentially devastating lawsuits brought by activists.
Taxes
The complexity of the tax code is another high hurdle for small businesses to clear. It now exceeds 70,000 pages. NFIB research calculates that tax paperwork costs small businesses $74 an hour. That’s 67 percent higher than what the average cost of compliance is for big businesses. And, according to the IRS, the typical small business now devotes 24 hours per year just on tax preparation.
High tax rates inhibit growth, too, by siphoning away money that small businesses would otherwise invest. President Obama and some members of Congress have proposed a cut in the corporate income tax rate. But that would exclude three quarters of small businesses who file as individuals. Those small businesses, many of which pay the top rate of 39.6 percent, create more jobs than corporations and they pay a larger share of federal taxes. Cutting small-business income tax rates would free up capital, stimulate demand and strongly encourage job creation.
Health Care
Among the barriers for small business perhaps the most worrisome is the spiraling cost of health care. In the last decade, average health insurance premiums for small firms have increased 63 percent. Small-business owners hoped that health-care reform would reduce the cost of insurance. Instead, Obamacare made it more expensive. Sixty-two percent of small businesses we surveyed claimed that per employee premium costs were higher in mid-2014 than in mid-2013.
Only 40 percent of small employers offer employer-sponsored health insurance, down six points from the previous year. It can’t help that Obamacare created 21 new taxes, new mandatory coverages and new red tape that has reduced the choices available to small-business owners.
One of the worst of these new taxes is the Health Insurance Tax. This tax falls on the fully insured market, where 88 percent of small businesses purchase their coverage. While the tax is on the insurers, the non-partisan Congressional Budget Office has stated that this increase will get passed on to customers in the form of higher premiums.
Colorado has been no slouch in threatening small businesses with endlessly higher minimum-wage rates, paid-leave proposals and greater employee powers to snoop on employers’ private information. But the really big barriers are still erected in Washington.
I’m certain that the President and the various candidates who aspire to his office will have a lot of glowing things to say about the “moms and pop” shops during Small Business Week. But if they truly want to help small employers boost the economy and create more jobs, they need to tear down these obstacles to small business success. Small-business owners need more than a week of complimentary speeches.
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