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Washington Watch - June 1, 2011


Editor's Note: Budget Negotiations Update

Budget negotiations between House Democrats and Republicans have hit a deadlock as of this week, with the House voting down a proposal yesterday to raise the debt limit without offering any budget reduction measures. President Obama is scheduled to meet with House Republicans today to lay out his vision for an agreement and to meet with House Democrats tomorrow.

For the past several days, Vice President Joe Biden has been working with congressional leaders to try to hammer out a budget deal acceptable to both parties and as a means to garner support to raise the debt ceiling.

Democrats are pushing for revenue increases (in the form of ending tax subsidies for oil companies or ending the Bush tax cuts for those making over $250,000) as well as spending cuts. Republicans have so far refused to raise taxes and are focused solely on spending reductions.

Republicans are largely standing behind the controversial budget proposed by Rep. Paul Ryan (R-Wis.), released last month, which tackles expenses created by entitlement programs and would transform Medicare into a voucher system.

After the Ryan proposal passed the House, Senate Majority Leader Harry Reid (D-Nev.) brought it to a vote on the floor and it was defeated.

Stay tuned to Washington Watch for updates on this issue.

NASE Featured In Huffington Post

The NASE Executive Director Kristie Arslan recently appeared on the Huffington Post website. To read the full post, click here.

Five Big Myths About American Small Businesses

By Kristie Arslan

Politicians on both sides of the aisle have been struggling to stimulate the economy and put a definitive end to the Great Recession. These efforts have included sector-specific bailouts, cash for clunkers and the American Recovery and Reinvestment Act of 2009, which helped some notable companies and stimulated some industry sectors, but most of these efforts provided little benefit to the typical American business.

Last week, the Obama administration recognized the contributions of this important business demographic with its National Small Business Week. It's worth challenging a few of the myths about the American small business landscape -- as they are truly the engine of the economy.

1. Most Americans work for large corporations

Conventional wisdom used to hold that what's good for General Motors is good for America. While GM may no longer be the poster child for corporate America, large corporations can afford lobbyists who make sure their clients are first in line when legislation is drafted. One of the justifications in protecting the interests of corporations first is the notion that they employ the vast majority of Americans and that corporate interests are necessarily aligned with most workers'.

But large businesses only employ about 38 percent of the private sector workforce while small businesses employ 53 percent of the workforce. In fact, over 99 percent of employing organizations are small businesses and more than 95 percent of these businesses have fewer than 10 employees. The reality is that most Americans are employed by a very small business that has little in common with the tiny sliver of the business demographic represented by corporate America.

Read the rest of the article here.

Congress Reviews Another Tax Gap Measure That Would Hurt Small Biz

House Small Business Committee Subcommittee on Contracting and Workforce recently held a hearing on a withholding provision long-opposed by the NASE and other small business organizations. It was titled, "Defer No More: The Need to Repeal the 3% Withholding Provision." The hearing explored Section 511 of the Tax Prevention and Reconciliation Act of 2005. This section contains a sweeping requirement mandating that federal, state, and local governments withhold  three percent from payments for goods and services. This tax withholding requirement affects all government contracts as well as any payment to any person for a service or product provided to a government entity.

The subcommittee heard testimony from legislators and business owners regarding the undue burdens and increased harm this law would cause micro-businesses and independent contractors. The hearing revealed overall support for a repeal of this provision and highlighted that its implementation has been delayed more than once since it was passed in 2006.

The hearing opened up with Chairman Mick Mulvaney (R-S.C.) who commented that this provision, like the 1099 rule recently repealed in a bipartisan fashion, was designed to close the gap between the amount of taxes owed versus taxes paid (the "tax gap"), but its implementation would do more harm than good when it came to small businesses. For example, it would force contractors to wait until the end of the year to recoup expenses and would also put a serious dent on their ability to pay subcontractors participating in a project.

Representatives from the U.S. Department of Defense were also on hand to point out other drawbacks of implementing the three percent withholding provision, including that it would cost more to implement than it would actually be able to collect.

Read more testimony from the hearing here or watch video

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