State of the Union versus the State of Small Business

On January 24, the President delivered his State of the Union address. He expressed interest in removing regulatory hurdles impeding small businesses (as well as large ones). He also offered a mixed message about taxes: on the one hand, he wants to expand relief to small businesses, while on the other hand, he reiterated his desire to raise taxes on taxpayers with income over $250,000 (remember most small business owners report their share of business income on their personal returns because of pass-through tax treatment and many fall within this category). Overall, in my opinion there was scant recognition of the importance of small business to the U.S. economy, especially in light of recent rhetoric from the White House about changes for small business (e.g., elevating the SBA to a cabinet level). How did the President’s remarks play with small business?

If I can be so bold as to synthesize the numerous blog posts I read, there seemed to be a consensus for applauding the message but concern about his ability to deliver. Details about how his proposals would be translated into action were scant.

The real question is whether what Washington does or does not do really matter to small business creation and growth? According to the Small Business Authority Index, small business creation was up 7% in December compared with November. Something is working in the hearts and minds of entrepreneurs, even if Washington is not.

Sure, it would make things a lot easier, and more profitable, for small businesses to operate if there were less regulation, lower taxes, and more access to credit (the triumvirate of small business issues). However, it is because of the very nature of entrepreneurs—to create and overcome obstacles—that businesses will likely continue to be created, regardless of Washington action or inaction. Small businesses continue to keep their eyes on the customers; as long as they keep coming, small businesses will keep forming and growing.

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