On the presidential campaign trail, Sens. Hillary Clinton, Barack Obama, and John McCain have all pledged their support for ensuring the vitality of small businesses. But just as they don’t all see eye to eye on how the country should be run, they don’t all stand in agreement on the issues.
With small businesses providing 60% to 80% of new U.S. jobs and employing about 50% of the workforce, their needs prove to be a significant factor necessary to improving the economy. However, the issues that affect small businesses the most–implementing immigration reform, providing universal healthcare, increasing the minimum wage, discouraging bundled government contracts, and sponsoring employer tax cuts–sometimes fall on both sides of the partisan fence.
“What makes America go is business enterprise,†says John Sibley Butler, professor of management and sociology at the University of Texas at Austin. “All of the candidates realize that. You’re not going to find a candidate that says, ‘I’m not going to support small businesses.’ The question is how do they plan to do it? They all have different ways of making it go.â€
Small and Disadvantaged Businesses
“In federal contracting, there continues to be a shift of small business contracting away from 8(a) firms and small disadvantaged businesses (SDBs) towards non-minority-owned small businesses, businesses owned by non-minority women, and businesses owned by veterans,†says Thomas D. Boston, professor of economics at Georgia Tech, and author of the book Affirmative Action and Black Entrepreneurship. “Rather than expanding the pie, the federal government has maintained the small business contracting goal of 27%. This means that programs designed to assist minority-owned businesses are competing with other small business programs for a fair share of the designated small business contracting dollars.â€
Obama noted recently that the gap between the amounts of venture capital and access to business loans available to minority-owned small businesses compared to other small businesses continues to grow. “Less than 1% of the $250 billion in venture capital dollars invested annually nationwide has been directed to the country’s 4.4 million minority business owners,†Obama states on his Website.
“Historically, Republicans established the federal government’s minority business program. But they have also attacked the affirmative action regulations that are required to keep those programs constitutionally viable,†Boston says. “On the other hand, Democrats have been less focused on providing support for small and minority-owned businesses, but they have supported affirmative action programs that are essential to ensuring the survival of those programs.â€
Obama has vowed to strengthen the Small Business Administration programs that provide capital to minority-owned businesses, support outreach programs that help minority business owners apply for loans, and work to encourage the growth and capacity of minority firms. Clinton pledges to make sure that women- and minority-owned small businesses receive their fair share of government contracts, removing obstacles that block many of them from doing business with the federal government. According to a press release, Clinton also plans to raise the current small business allocation for government contracts from 5% to 8%. McCain has been mostly silent on topics related to women- and minority-owned small businesses.
Immigration
With heightened border control and immigration laws in the works, experts question whether some small enterprises can survive without immigrants who accept below-wage work. In the farming, landscaping, and construction industries, immigrant labor is common. Unless a guest worker program is implemented, some small
businesses fear they won’t be able to find employees willing to work for less. Immigration bills continue to fail in Congress, but all three candidates were in support of the most recent bill, the Comprehensive Immigration Reform Act of 2006. One of its provisions was to provide a path to citizenship for illegal immigrants.“To the degree that minority-owned businesses are located in sectors that require low- skilled labor, tightening immigration laws will adversely affect them,†Boston says. “Minority businesses, particularly in the service sector and in construction contracting, use low-skilled immigrant workers. These businesses are likely to suffer the greatest consequences from the immigration bills that are being proposed.â€
Obama offered three immigration amendments that were included in the failed Senate bill. His input helped to strengthen the requirement that a job be offered at a prevailing wage with benefits to American workers before it is offered to a guest worker.
In 2005, McCain was among a group of legislators who introduced the Secure America and Orderly Immigration Act, a bipartisan proposal to immigration reform which also failed in the Senate. His support of a guest worker program and the path to citizenship puts him at odds with many in the Republican Party.
Minimum Wage
According to a 2006 Gallup poll, 86 % of small business owners don’t think that the minimum wage affects their business. The poll also reported that three out of four small businesses said that a 10% increase in the minimum wage would not impact their company. At the time, nearly 50% of small business owners also said that the minimum wage should be increased, and only 16% of owners think the minimum wage should be reduced or eliminated entirely.
McCain, Clinton, and Obama voted to increase the minimum wage in February 2007 to $7.25. The bill also increased tax breaks for businesses like restaurants by $8.3 million. The minimum wage had not been increased since 1997.
Although research has proven differently, many critics, including the National Federation of Independent Businesses (NFIB), have argued that increasing the minimum wage would hurt small businesses. “If you increase the minimum wage it will be a hardship on small businesses,†Butler says. Republicans, felt the tax break would balance that hardship.
According to her Website, Clinton will fight to raise the minimum wage and to peg Congressional pay raises to increases in the minimum wage. Obama has stated that he would like to create a living wage and index it to inflation.
Tax Cuts
Tax increases cut into the profit margin of small businesses, which prevent them from reinvesting in the business and increasing wages and benefits to attract skilled employees.
“The tax structure of America is set up for business enterprise,†Butler says. “The purpose of government is to create the infrastructure for business and wealth.â€
McCain states on his Website that he wants to reduce the federal corporate tax rate to 25% from 35%. “Entrepreneurs should not be taxed into submission,†said McCain at the Hispanic Business Expo. He believes the taxes we impose on American companies should be no higher than the average rate our major trading partners impose on theirs. Under the current corporate tax rate of 39%, small businesses are at a disadvantage to large businesses and are impaired when competing in the global economy. “We currently have the second-highest combined corporate tax rate in the industrialized world, and it is driving many businesses and the jobs they create overseas,†McCain says.
Universal Health Care
“Rising healthcare costs are a threat to our global competitiveness, a threat to our families’ budgets, a threat to our government’s solvency, and a threat to the profitability of American business. America has the best healthcare in the world, and we must work to keep it so, but we must also work to control costs and make that care more accessible. One way to accomplish those goals is to help small businesses link together to provide healthcare to their employees,†McCain said at the Hispanic Business Expo. The presumptive Republican nominee offers to make healthcare affordable, but not universal.
During the current presidential primary, universal healthcare stands out as a cornerstone issue that candidates are addressing. According to the NFIB, lack of insurance is especially problematic for small businesses and their employees.
“A universal healthcare program would help small businesses and minority-owned businesses tremendously because it would significantly lower the cost of providing benefits to their workforce,†Boston says.
Obama’s national healthcare plan will make health coverage affordable to all Americans, including the self-employed and small businesses. Small businesses that meet certain revenue limits will be exempt from contributing a percentage of payroll costs toward the costs of the national plan. Obama’s plan will also reimburse all employers for a portion of catastrophic healthcare costs that they incur above a threshold if they guarantee such savings are used to reduce the cost of workers’ premiums. Similarly, Clinton’s plan will provide healthcare tax credits to small businesses to create incentives for job-based coverage.