Small businesses are critical to our economy. In fact, they generate, on average, 6 in 10 net new jobs. Fortunately for our leading job creators, Congress took an important step at the beginning of the year to protect them and their core customer base by extending income tax cuts for the middle class, as part of the fiscal-cliff deal. But lawmakers now have another economic obstacle in their path: the sequester — a host of automatic spending cuts that began March 1 because lawmakers couldn’t agree on a deal to reduce the deficit. These across-the-board cuts could have dire consequences for the economy and small employers. But all is not lost. There are still some areas in the budget where Congress can quickly pick up revenue to avoid the bulk of the cuts.
Unfair tax loopholes funnel billions of dollars into major oil and gas company coffers every year. Political leaders on both sides of the aisle have pointed to the need to get rid of them, and small employers agree.
Small Business Majority’s opinion polling found three-quarters of entrepreneurs support ending government subsidies to oil and gas companies. What’s more, 6 in 10 believe we should rein in the oil industry even if it means a small increase in gas prices.
If that sounds surprising, it shouldn’t, given our budget crisis. The sequester will reduce funding for everything from defense to infrastructure to small-business loan programs. It will cost the nation 1.5 million jobs and half our economic growth in 2013, according to the nonpartisan Congressional Budget Office.
That’s why spending cuts need to be wielded with a scalpel, not a chainsaw. Closing tax loopholes is part of a balanced approach to this crisis, and entrepreneurs agree it’s necessary. In fact, 92 percent believe big corporations’ use of loopholes is a problem, and three-quarters say their own business is harmed when corporations use them to avoid taxes.
It also doesn’t help small businesses or the economy as a whole when special tax treatment is given to hedge fund managers and Wall Street powerhouses. The controversial “carried interest loophole” lets finance titans pay a top tax rate of 20 percent on part of their earnings, only half of what they would pay at the top rate for normal wages and salaries. This puts other taxpayers at a huge disadvantage, including small-business owners. Our polling shows two-thirds of entrepreneurs believe hedge fund managers should have their incomes taxed at normal rates.
The bottom line is that policymakers concerned about our economy should be leveling the playing field for small businesses, not perpetuating tax breaks for the big boys. The CBO estimates that ending subsidies to gas and oil companies would shore up $40 billion over 10 years and closing the carried interest loophole could raise $21 billion. Together, these measures would significantly offset cuts caused by the sequester.
However, finding short-term solutions to ongoing budget crises shouldn’t be the end goal. Small businesses want policymakers to resolve this problem for the long term so they and our economy have the sustained fiscal certainty they need to thrive.
John Arensmeyer is the founder and CEO of Small Business Majority.
Visitors get their first look at the American Veterans Disabled for Life Memorial, which opened to the public on Monday, Oct. 6, 2014. The new memorial is located off Independence Ave. SW between the Rayburn House Office Building and HHS. Buy photo here.