The Small Business Administration tracks new employer firms created every year, which are about 25% of all new businesses created. That means that three-quarters of all new businesses, those that everyone says creates the jobs, have no employees. Why? Because employees are the single biggest expense of any business and the single biggest headache from a legal and managerial perspective. As a small business, you don’t create jobs unless you’re sure the wind will be at your back for the foreseeable future.

 

Nevertheless, Congress is now focused on incentivizing small businesses to invest in equipment to grow their companies so they can hire more people. That seems to be a “field of dreams” approach—build it and they will come. Unfortunately, the customers aren’t coming, so why would any business owner with any sense invest in growth at a time when sales are declining? The National Federation of Independent Business, a Washington DC trade group, echoed that same sentiment recently. Bill Dunkelberg, NFIB’s chief economist, reported on the findings of their Index of Small Business Optimism, saying, “Consumers are pessimistic, business owners are pessimistic and Washington’s leadership has been unable to inspire any confidence in the future.”  Actually capital outlays for small business over the past six months hit a record 35-year low and 73% of business owners said this was not a good time to expand.  

 

Small businesses have studied the tax incentives proposed by the administration and find that they don’t solve their problem. First off, small businesses have to purchase the qualifying equipment in 2010 and 2011 to be able to write off 100% of the amount they spend. But here’s the catch. Under a current tax rule, Section 179, small businesses can already write off up to $250,000 in equipment. How many small businesses actually spend more than that? Under the new incentive, they would have to spend more than $250,000 in the coming year to see any benefit. Is the risk worth it? Apparently not. It appears that the NFIB has joined forces with the U.S. Chamber of Commerce, and the Business Roundtable (which represents multinational corporations). They are planning to strongly oppose some of the small business proposals now being considered.

 

Small business is not going to lead us out of a down economy when the future both politically and economically is so uncertain. And they’re not going to make long-term commitments in equipment and people for a one-time gain. It’s time to take the burden of the recovery off small business. When the economy swings up, small business will be there.