The economy may be good for some sectors (the government reported that GDP increased an annual rate of 2.3 percent in the second quarter of 2015), but the overall state of entrepreneurship isn’t good.
According to the U.S. Census Bureau, the number of startups has been weak, and fewer than the number of closings (the reasons for these closures aren’t part of the statistics). (The stats are only through 2012; there are no current statistics available. Anecdotally, I haven’t seen improvement.)
At the end of July, the Ewing Marion Kauffman Foundation presented some suggestions to Congress for “making entrepreneurship growth vibrant again.” These include:
- Restructure the Tax Code. Current existing incentives for small businesses don’t necessarily work. The law shouldn’t limit the ability to deduct startup losses, and not all businesses benefit from breaks such as the Sec. 179 first-year expensing deduction. The biggest gripe: the tax rules are too complex, especially for first-time business owners.
- Welcome immigrants. These individuals are more than two times as likely as native-born Americans to start businesses. There should be a special visa created for immigrant entrepreneurs.
- Embrace regulatory evolution. The layering of regulation over regulation over time creates rigidity that burdens new businesses. Regulations should keep up with changing times (e.g., new technologies) by adapting and responding to innovations and changing business models.
- Enable innovation. Intellectual property law (e.g., patents) should be changed to help maximize innovation.
- Encourage competition. The government should not stand in the way of disruption and innovation.
What to do
I think the above-outlined suggestions to Congress all have a lot of merit and deserve attention. Will Congress act? Who knows?
In my view, to get entrepreneurship moving, two things have to get done:
- Accept the axiom that small business creation translates into job creation. The government says that “the major part of job generation and destruction takes place in the small firm sector, and small firms provide the greater share of net new jobs.” Thus, to get the economy growing, small businesses must bloom. Attention must be given to matters of concern to small businesses and entrepreneurs.
- Support elected officials who support actions that encourage entrepreneurship (less regulation, simpler tax rules). While still more than a year away, the upcoming presidential election could have a profound effect on whether or not entrepreneurship will thrive in years to come. Let’s keep an ear open for policy platforms benefiting entrepreneurship.