The following guest editorial by NFIB/Washington State Director Patrick Connor was sent to the media for free use as content for their publications and websites, or as background material for related stories they might be working on during National Small Business Week, May 12-16.
Too bad it was released the same week Monica Lewinsky returned to the celebrity stage. The Brookings Institution’s Declining Business Dynamism in the United States report never stood a chance against her at grabbing the attention it deserved.
There was another strike against it. “I am fearful that this critically important study is not being noticed because it’s not about Wall Street,” wrote U.S. News contributor Jean Card, one of the few to report on Brookings’ absolutely alarming study. “The political class only really cares that the Dow hit a record high last week.”
The political class in Olympia and in Washington, D.C. had better wake up fast. It’s only seven pages, so state legislators can skim it themselves, instead of leaving it to an aide. Highlights from the research done by economists Ian Hathaway and Robert Litan include:
- “… business deaths now exceed business births for the first time in the thirty-plus-year history of our data.”
- “Firms and individuals appear to be more risk averse … businesses are hanging on to cash, fewer people are launching firms, and workers are less likely to switch jobs or move.”
- “…the decline in dynamism hasn’t been isolated to particular industrial sectors and firm sizes … the decline in dynamism has been nearly universal geographically the last three decades—reaching all fifty states and all but a few metropolitan areas.”
As a small-business lobbyist, it will forever be my job to remind legislators of two very important facts: Small businesses employ more working Americans than big businesses do, and they are not just smaller versions of bigger companies—they have different difficulties in remaining solvent. Tend to those, and you’ll have a business dynamism that creates jobs.
But how many listen?
I can accurately report that at least 69 out of 147 Washington state representatives and senators do—but that’s not even half of the Legislature. I believe this highlights the problem the Brookings’ research is finding.
After each session of the Washington Legislature, the National Federation of Independent Business tallies votes for and against the most important pieces of legislation affecting small-business owners. The 2013/2014 session had 19 issues that 69 lawmakers had 80 percent or better records on.
The issues are no mystery. Taxes and regulations – the same ones big businesses must abide by – fall harder on small businesses, which have fewer resources to absorb them and no high-priced CPAs at all to handle them.
“Small businesses significantly impact Washington’s economy,” reports the U.S. Small Business Administration’s Office of Advocacy. “They represent 98.1 percent of all employers and employ 53.7 percent of the private-sector labor force. Small businesses are crucial to the fiscal condition of the state and numbered 546,885 in 2010. Most of Washington’s small businesses are very small … most employers have fewer than 20 employees.”
Huge in number small businesses are, but tiny in influence due, I believe, solely to most legislators not understanding them. They are not Boeing, but explaining that – and having them comprehend it – has been hit and miss.
All businesses must carry workers’ compensation insurance, pay unemployment insurance taxes, and comply with local, state and federal regulations, but as Professor W. Mark Crain of Lafayette College in Pennsylvania notes, “… small businesses face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms.”
While neighboring states try and help small businesses a little, Washington state can be downright hostile. How else to explain a B&O tax that demands a cut of your monthly gross revenue whether or not you’ve made a profit in the same period.
Hope Brookings can find signs of a reversal in a later report, but it need not waste any time here.
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