Letter to the House Regarding H.R. 1, the American Recovery and Reinvestment Act
January 27, 2009
Dear Representative:
On behalf of the National Federation of Independent Business (NFIB), the nation's leading small business advocacy organization, I am writing to express our strong reservations about H.R. 1, the American Recovery and Reinvestment Act.
According to the NFIB's Small Business Economic Trends Survey, all economic indicators – sales, plans for hiring and capital investments, and general economic confidence – are at or near all time lows in the 35-year history of the survey. Bold action is needed to get the small business economy going again. Over the last decade small business has created 60 to 80 percent of net new jobs and, with the proper incentives, small business can again play a vital role in any economic recovery.
Unfortunately, the bill under consideration provides little relief or incentives to small businesses. Including an extension of increased small business expensing for 2009 is a good start, but in the current economic climate it is not enough. Investment incentives to fuel a recovery must be coupled with significant short term relief to help small businesses and their employees through the current economic crisis and then build a sustained recovery in the future.
We continue to urge Congress and the Administration to consider a six-month payroll tax holiday for both small business owners and their employees. Such immediate tax relief would help both small business employers and employees get through these tough economic times. Payroll taxes are often the highest taxes paid by many small business owners and many employees, so this relief will provide real help. In addition, incentives – such as increased small business expensing – must be sustained and meaningful. Increasing the expensing limits to $250,000 should apply in both 2009 and 2010 and should include investments in changes to business property, not just the purchase of new equipment.
Changes such as these are the right mix of relief and incentives to help small businesses and their employees. The impact of the current bill to build an economic recovery and, in particular, its support for small business is limited. That is why the Congressional Budget Office raised concerns about the current bill's massive amounts of spending and the ability to get that money into the economy quickly and impact economic growth.
Additional spending on some programs is certainly necessary, but much of the spending has no connection to economic growth or job creation. For example, $1 billion in funding for climate change research at NASA and NOAA or $1 billion for the census will do little to stimulate the economy and create jobs. In contrast, America's small businesses are proven job creators and employ more than half of American workers, so providing them with the tools to create more jobs is the best way to create an immediate and sustained economic recovery. In addition, small business owners make tough budget choices everyday, especially during difficult economic times like these. They also believe that the federal government needs to make tough decisions about spending taxpayer dollars and many of these projects will increase the deficit with little economic stimulus in return.
Some of the proposals raise specific concerns. In particular, the expansion of unemployment benefits changes the nature of the unemployment insurance program and could lead to payroll tax increases in the future. Expanding the program to new beneficiaries – such as those looking for part time work – will increase the outlays from the program which are likely to be replaced with payroll tax increases in the future. Small business owners must pay payroll taxes no matter how profitable or unprofitable the business is cutting into the business cash flow, so expansion of a program that could increase payroll taxes on small business owners is of particular concern.
America's small businesses are the risk takers and job creators in our economy. But in the current economic environment, small businesses like the rest of the economy are struggling. With the right relief and incentives, such as payroll tax relief for small businesses and their employees, small business can play a major role in creating a strong and lasting economic recovery. Unfortunately, the current bill does not include the kind of relief and incentives that will help to support the small business economy and create a lasting economic recovery.
Sincerely,
Dan Danner
Executive Vice President
Public Policy and Political