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Washington Watch - January 26, 2011
NASE: Economic Recovery Starts with Small Business
Getting our economy back on track depends on the success of our nation’s
small businesses. Critical measures enacted last year like the Small
Business Jobs and Credit Act and the extension of the Bush-era
tax cuts delivered much needed tax relief
to small businesses, especially the self-employed and micro-businesses, helping
business owners keep their doors open and even expand their operations.
The latest messaging from the White House signals that President Obama is
serious about continuing to support the small business community. During his State
of the Union address, the President stated
that he is open to fixing an element of the health care reform law that
unwittingly created a significant regulatory burden for small business owners:
“Now, I’ve heard rumors that a few of you have some concerns about the
new health care law. So let me be the first to say that anything can be
improved. If you have ideas about how to improve this law by making care better
or more affordable, I am eager to work with you. We can start right now by
correcting a flaw in the legislation that has placed an unnecessary bookkeeping
burden on small businesses.”
The President is referring to a small, but incredibly onerous provision
buried in the health care reform bill requiring small business owners to submit
IRS Form 1099 for every purchase of goods and services over $600, which will
increase the time and money spent on tax preparation for three out of four
business owners. This is the type of burdensome regulation that prevents small
businesses from thriving.
It is also the type of burden that the President seems eager to eliminate
with his vision for a 21st century regulatory system. This goal was recently
promoted by the President in the pages of the Wall
Street Journal. In the lead up to the
State of the Union, the President issued an executive order addressing the
overwhelming regulatory burden on small businesses, especially our nation's
smallest businesses - the self-employed. A key component directs federal
agencies to consider the cost/benefit analysis of proposed regulations and
choose the least burdensome path for small business. While the executive order
is a step in the right direction as agencies have all too often issued
regulations without considering their impact on small business, creating onerous
compliance costs and difficulties.
There is, however, a glaring problem with the E.O. and the Regulatory
Flexibility Act: the agency with the single largest impact on small business –
the IRS – is exempt from this law. The IRS is not required to perform any sort
of analysis regarding the impact of their regulations on small business.
Without addressing the elephant in the room, there is only so much benefit this
E.O. will deliver to the majority of small businesses.
Enhancing competitiveness and expanding employment are solid economic goals.
But policies to get us there have to take into account the demographics of our
nation’s businesses. Policymakers need to continue legislating to the majority
of small businesses, not just to the corporate giants.
President Obama Unveils Regulatory Strategy
As part of President Obama's Executive Order on Regulatory Strategy, he
included a specific portion aimed at small businesses. His memorandum
specifically mentions the Regulatory Flexibility Act, which requires federal
institutions to consider the effect of proposed regulations on small
businesses.
The NASE has worked with the SBA Office of Advocacy in the past to point out
existing harmful regulations. The home office deduction is one such case.
Business owners who use a portion of their home regularly and exclusively for
business are permitted to deduct a portion of the costs of upkeep of this home
office. Currently, many micro-businesses neglect to take the home office
deduction because the eligibility requirements are too difficult to understand
and make it difficult to comply. For this reason, the NASE has supported the
creation of an optional standard home office deduction.
Another regulation that the Association finds burdensome to the
micro-businesses and the self-employed is the 1099 rule, which was passed under
the health law and set to go into effect in 2012. The new law would require
every business owner to issue a Form 1099 to merchants for goods or services
over $600.
A recently released Executive Order outlines the following guiding principles
for government agencies when crafting regulation:
Consistent with law, Agencies must consider costs and benefits and choose the
least burdensome alternative.
- The regulatory process must encourage public participation and an open
exchange of views, with an opportunity for the public to comment.
- Agencies must attempt to coordinate, simplify, and harmonize regulations to
reduce costs and promote certainty for businesses and the public.
- Agencies must consider low-cost approaches that reduce burdens and maintain
flexibility.
- Regulations must be guided by objective scientific evidence.
- Existing regulations must be reviewed to determine that they are still
necessary and crafted effectively; if not, they must be modified, streamlined,
or repealed.
- Taken together, these principles will create a more effective and
cost-efficient regulatory framework. In addition to this EO, the Administration
is taking two new steps to promote this balanced approach to regulation.
Read the entire Regulatory, Small Business and Job Creation memoranda here.
President Obama's Op-Ed in the Wall Street Journal can be found here.
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