A Mid-Year Update from Capitol Hill
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We’ve reached the mid-year point for the new 110th Congress, the first to be led by Democrats in 12 years. The assumption of power was accompanied by changes in leadership: Democrats John Kerry (D-MA) and Nydia Velazquez (D-NY) became the new chairpersons of the Senate and House Small Business Committees, respectively. Democrats, led by the new House Speaker, Nancy Pelosi (D-CA), were poised to implement small business policies that they had proposed while in the minority. So, what impact is Capitol Hill having on small businesses? Here are highlights of legislative efforts from the first six months, and a look ahead.
Health Care
To date, the Democrats’ exclusive health care focus has been the reauthorization of the successful State Children’s Health Insurance Program (SCHIP). Given that 37 percent of the 6.6 million children currently enrolled in SCHIP have parents who work in businesses with fewer than 100 employees, this issue directly impacts small business workers. The legislation is due to be completed shortly, and the program will likely be expanded far beyond its current $5 billion per year level.
It is assumed that many more children of small business employees are eligible but not yet covered by SCHIP, prompting Senators Kerry and Senate Small Business Committee Ranking Member Olympia Snowe (R-ME) to introduce a bill that would establish an intergovernmental task force to encourage the enrollment of eligible children of small business employees in SCHIP. Representative Rob Andrews (D-NJ) has proposed that small businesses be allowed to actually buy into SCHIP to cover eligible children as part of family plans.
Energy
During the past six months, Congress has been quite active in small business energy policy. In May, the House Small Business Committee passed The Small Business Energy Efficient Business Act to provide loans, education, and investment to small firms. As a result small businesses that are acquiring or developing energy efficient technologies would see more flexible Small Business Administration loan terms. The SBA would also guarantee debentures to invest in small businesses engaged in researching, manufacturing, developing, and bringing to market renewable energy sources.
The CLEAN Energy Act recently passed the Senate and includes a host of bipartisan small business energy provisions,thanks toSenators Kerry and Snowe. The energy bill now allows small businesses conducting energy efficiency or renewable energy research and development to be given priority consideration in the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. The Act also establishes renewable energy loans for small firms.
Senators have also introduced legislation to institute a fuel emergency assistance program for small companies; extend and enhance energy efficiency and solar energy tax incentives; and provide tax credits and increased tax deductions for small business owners who use their vehicles for work.
Access to Capital
Having watched the SBA’s budget decline more than 37 percent since 2001, the Democrats are determined to breathe new life into the agency and reduce the fees that are now being charged to borrowers who participate in its flagship 7(a) program (sometimes as high as $50,000 per loan). Accordingly, the Senate approved an increase of $97 million over the $464 million requested by the administration for the SBA. The House recently added $117 million.
Both the Senate and House have also increased funding for a host of other small business loan, venture capital and technical support programs, including the SBDC’s, SCORE, Women’s Business Centers, the Microloan program, and a number of minority and veterans entrepreneur programs. And, the President signed legislation adding $25 million for economic injury loans for small businesses impacted by the 2005 Gulf Coast hurricanes.
Lastly, federal small business procurement has been a source of contention between congressional Democrats and the administration during the past six years. Small businesses and women-owned firms are supposed to receive 23 percent and 5 percent, respectively. But, last year those numbers fell considerably short. A bill pending in the Senate would increase the small business percentage to 30 percent and add a requirement that 5 percent of contracts go to “green” businesses.
Minimum Wage
Enactment of a minimum wage increase from $5.15 to $7.25 was a top priority of the Democrats as they swept into power. The legislation was signed into law after endless procedural machinations and a host of amendments providing small business tax reductions.
Taxes
Small Business Tax Reductions: The final minimum wage law includes $4.84 billion in small business tax relief over 10 years. Most of these breaks will fuel an expansion of a tax credit program for employers that hire employees such as former welfare recipients and at-risk youths. The law also increases the deduction for equipment purchases to $125,000; and includes tax incentives for rebuilding areas affected by Hurricane Katrina.
Estate Tax: A number of efforts to amend or repeal the estate tax early this year failed. Absent any change in the law, the exemption levels will continue to go up: $2 million in 2008 and $3.5 million in 2009, with a top tax rate of 45 percent.The tax then disappears in 2010, and returns to a $1 million exemption level with a 60 percent top rate in 2011. Congress is expected to pass a compromise to raise the exemption amount and cut the top tax rate.
Internet Tax: Congress is planning to consider whether to renew, or even make permanent, the Internet Tax Freedom Act that expires this year.
Other Small Business Issues
Paid Sick Leave: Senators from both parties recently introduced legislation that would create a fund to provide up to eight weeks of paid family leave. The bill would charge employers and employees a premium fee of 0.2 percent of each employee’s earnings. It would apply to businesses with more than 50 employees, and only to employees who have worked for the same employer and paid insurance premiums for 12 months.
Sarbanes-Oxley: The House recently adopted an amendment that would exclude for one year the small business exemption for compliance with the requirements of the Sarbanes-Oxley corporate governance law — a welcome relief for many small business owners.
Patent Reform:
Patent reform legislation is brewing. This April, a bipartisan group of Senators and Representatives introduced patent-reform legislation, which would make it easier for small businesses to navigate the patent process, but more difficult to make claims and receive damages from infringements.
John Arensmeyer is Founder and CEO of Small Business Majority, a national small business advocacy organization.
SBR Resources:
To learn more about Congressional initiatives and how they impact small business owners, see the following Small Business Review articles:
The Democrats and Small Business
With Democrats in control of Congress, how will small business policy change?
Business Eyes the California Health Reform Debate
Will the Golden State set the pattern for a national solution?
The Twilight of Employer-Sponsored Health Insurance?
There are a lot of new proposals to deal with health insurance costs, including some that would take employers out of the picture.
The Minimum-Wage Bill—A Prisoner of War
Now part of the Iraq funding bill, the minimum wage proposal has been sweetened with small-business tax breaks.
SEC Relaxes Sarbanes-Oxley Compliance Rules for Smaller Companies
Will the SEC’s recent ruling relieve small firms from regulatory accounting burdens?
Conserve Your Energy…and Money
Government policymakers are attempting to help small businesses become eco-friendly.
Regulatory Resources:
To learn more about some of the new tax breaks, funding and other Congressional initiatives, visit the following web sites:
Minimum Wage Fact Sheets, Tools and More
SBA’s Office of Technology (SBIR/ STTR)
SBA’s Small Business Development Centers
Small Business Energy Efficient Business Act
State Children’s Health Insurance Program (SCHIP)
