Opponents of Obamacare often state that the legislation will hurt the small business owner. Small business is the “backbone” of the American economy and crucial to this nation’s globalization and innovation. Many government agencies, legislators and media outlets increasingly fear the growing stranglehold the Federal government has on American entrepreneurs. Furthermore, much of what was promised with Obamacare will not be delivered for various reasons. For example, on May 27, 2013, Forbes.com reported;
Employees working at small businesses are unlikely to have any choice of plans in the exchanges designed for them.
The Obama Administration has delayed full implementation of the Small Business Health Options Program, or SHOP, in the 33 exchanges it will be running. Workers at small businesses were supposed to be able to log onto these exchanges and choose from among several competing plans. Instead, employees of a given firm will have just one option through the exchange until at least 2015.
The majority of the Affordable Care Act will come into effect this October, many Americans must examine the impact on their family and their small business, and for many non-business owners… it is important to understand the importance of small business to the American economy.
Small business powers the American workforce, but to the owners of small and medium enterprises (SMEs)… small business is much more than an electoral artillery shell to be lobbed during close elections. Before looking at government statistics, it is important to examine how Uncle Sam defines a “nonemployer” business. According to Census.gov;
A nonemployer business is one that has no paid employees, has annual business receipts of $1,000 or more ($1 or more in the construction industries), and is subject to federal income taxes. Most nonemployers are self-employed individuals operating very small unincorporated businesses, which may or may not be the owner’s principal source of income.
Small business in the U.S. and Colorado
According to the most recent numbers by Census.gov, statistics from 2008, there are 27,281,452 “businesses” in America. Of that, over 21 million are considered nonemployer firms. Twenty one percent of businesses in America are considered employers, nearly six million firms, and over 60 percent of those entities have four employees or less.
The Census.gov sites tell us that over 91 percent of businesses in America are small to medium sized enterprises that employ four people or less. According to BusinessInsider.com, small businesses in America outnumbered corporations 1162 to one in 2011. Business Insider also reports that Americans can open a business within six days; it would take 32 days longer and cost six times as much to accomplish the same thing in China or India respectively.
About small business in Colorado
According to the SBA, there were over 500 million small businesses in Colorado in 2008, of that over one-quarter of a million were employers, and they accounted for 50.2 percent of private sector jobs in the state.
Small business is big for America
According to the SBA.gov;
- Small business accounts for 54 percent of all U.S. sales.
- SMEs provide 55 percent of all jobs and 66 percent of net new jobs.
- The small business sector in America occupies 30 to 50 percent of all commercial space, approximately 20 to 34 billion square feet.
- The number of small businesses in the United States has increased 49 percent since 1982.
- Since 1990, as big business eliminated 4 million jobs, small business added 8 million new jobs.
The numbers start to make it clear that President Obama’s determination that $250,000 a year in income is rich… is in fact flawed. The expenses many small business owners incur eats away at any real profits very quickly. BusinessInsider.com explains that although 70 percent of businesses make it to their second year… a resounding 50 percent are out of business within five years.
Furthermore, small businesses are especially susceptible to disaster. In the same article cited above, Business Insider reports that if a business cannot resume business within 10 days following a disaster, it probably won’t survive.
Small business changes and innovates America
According to the Department of Commerce;
- From 1982 to 1987, the number of women-owned businesses increased by nearly 58 percent, from 2.6 million to about 4.1 million.
- From 1982 to 1987, the number of black-owned businesses increased by 38 percent, from 308,000 to 424,000.
- From 1982 to 1987, the number of hispanic-owned businesses increased by 81 percent, from 233,975 to 422,373.
- From 1982 to 1987, the number of asian-owned businesses increased by 89 percent 187,691 to 355,331.
- Small businesses are responsible for more than half of innovations developed during the 20th Century, including the zipper, the helicopter, the personal computer and important advances in the medical world such as insulin, the artificial heart valve and the pacemaker.
According to BusinessInsider.com in 2011,
- Small businesses create 13 times more patents per employee than large patenting corporations.
- Immigrants make up 12.5% of small business owners nationwide.
- In New York City, immigrants account for 46 percent of the incorporated self-employed.
Small business globalizes America
According to Trade.gov;
- A record number of U.S. companies, 302,000 firms, exported goods in 2011; nearly 98% of the exporters were SMEs with 500 of fewer employees.
- SMEs were responsible for nearly 33 percent of total goods exports in 2011.
- The same year, 97 percent of U.S. manufacturers that exported goods were small and medium enterprises. Small business accounted for nearly 19 percent of the total value of manufacturer exports in 2011.
- In 2011, SMEs exported $13.9 billion in goods to South Korea (a 22 percent increase from the prior fiscal year) and $4.5 billion in good to Columbia (a 24 percent increase from 2010).
- California had the most SME exporters at 72,039 and Texas’ SMEs exported the largest value of exports at $70.1 billion last year.
- Of the companies that imported goods, 97 percent (178,820) were SMEs and the value of 2011 imports neared $600 billion (a 1.2 percent increase from 2010).
All trade figures here and much more can be found at Trade.gov.
Strangling small business with Obamacare
According to SmallBusiness.House.gov and the House Committee on Small Business;
Regulatory Impediments Strangle Small Business Job Creation
- Small firms bear a regulatory cost of $10,585 per employee, which is 36% higher than the cost of regulatory compliance for large businesses. (2010 SBA study, The Impact of Regulatory Costs on Small Firms).
- Since 89% of firms in the United States employ fewer than 20 employees, the smallest businesses are shouldering a disproportionate regulatory burden. (NFIB).
- Compliance with environmental regulations costs small businesses four times more than large firms. (NFIB)
Tax Complexity Harms Small Businesses Disproportionately More Than Large Firms
- Tax issues are the single most significant set of regulatory burdens for most small firms. A recent NFIB Research Foundation study found that four of the top ten small business problems were tax related.
- Small firms pay 67% more to comply with the tax code than larger firms. (SBA Office of Advocacy)
- Most small businesses file their taxes on an individual return. According to NFIB, nearly 75% of small firms are organized as “pass through” entities, such as sole proprietorships, partnerships or LLCs, where business income is passed through and taxed at the individual rate.
- At a House Small Business Committee hearing, National Taxpayer Advocate Nina E. Olson said, “*Tax+ complexity has a direct impact on small business viability and job growth. The more time and resources a small business spends on tax compliance, the less time it will have to grow and hire employees.”
