Regulation and new laws are choking businesses, which must speak out
Businesses have had a tough time since the economic meltdown of 2008. We have been hit from so many different directions simultaneously and rapidly that we have focused on simple survival.
In the meantime, in response to the economic crisis, the federal government has imposed a raft of new regulations and laws on business owners that, however well-meaning, have served to further strangle small business investment and add red tape to the process of running a business.
Now is the appropriate time for business to re-state the moral and ethical imperative for free enterprise, free markets and free people.
I don’t think President Obama meant to insult anyone a few weeks ago when he stated that, “If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that.”
That last line has gotten most of the attention, but I think it’s more important to consider the lines leading up to it. Yes, roads and bridges and schools are important for laying the groundwork for America’s success — but roads and bridges and schools don’t pay for themselves. The bedrock of America’s greatness lies in its small businesses and the people who take the risks necessary to build them, employ others and create wealth — which, among other benefits, creates a broad tax base that can fund public infrastructure. But even when it operates efficiently, which it seldom does, government is merely the conduit for growth, not its cause. The real source of prosperity is America’s business class.
The American model of free enterprise has created more wealth and pulled more people out of poverty than any other economic model in history. Business format franchising encompasses nearly 1 million businesses, or about 4 percent of all small business; employs directly or indirectly nearly 18 million people, or about 12% of the private sector; and generates $2.1 trillion dollars, or about 9% of the private sector, according to the International Franchise Association.
Entrepreneurs and small businesses are responsible for all of the country’s net job growth since the mid-1980s according to research by the Kauffman Foundation, a non-profit focused on entrepreneurship, education and innovation.
Yet instead of help, investors and business owners have often been met with shrill rhetoric, finger-pointing and blame-casting over the past several years, which is why the president’s comment touched a nerve.
Whether it’s taken out of context or not is not the point. Even without the statement, we are left with the highest top marginal tax rate for business in the developed world and an out-of-control regulatory apparatus that puts a tremendous burden on small businesses — the real heroes of the American economy.
The fundamental question we face: What direction and philosophy best assure small business success? Should they compete to enjoy the fruits of their labors, as is the nexus of business, or should those fruits help stock bloated public worker pensions? Should the private sector serve the public, or does the public sector exist to serve the private? If private enterprise is at the center of our thinking, do we need to develop a tax structure that keeps more wealth in the hands of the people who create it?
What we need is to overcome these challenges by working together. However, our solutions should reflect our great history of free markets, free enterprise and free people and include individuals from all levels of business — the people who create the wealth that government has too often been only too happy to raid through taxation.
Steps to help businesses thrive
Here is what needs to be done, in my opinion, if our goal is to pursue jobs and solutions rather than ideology:
1. Kill or modify the 2002 Sarbanes-Oxley reforms of publicly traded companies’ operating standards to lessen the burden on business.
2. Eliminate payroll taxes on young companies.
3. Allow small businesses to use tax-free investment vehicles modeled on non-profit foundations and 529 college programs.
4. Offer a tiered tax structure where venture capital and private equity would pay low capital gains rates initially, then higher rates as they develop.
5. Create small business loan programs that are accessible and real, as opposed to the lip service that has been offered over the last several years.
6. Consider a summit on entrepreneurship to hear from the folks that are making it happen in the trenches every day.
The federal government seems to have forgotten about the true heroes of the American economy: our small business owners. We need to re-introduce our political leaders to the men and women who are creating jobs and supporting their local communities through small business.
They need to understand the vision, courage, persistence and will necessary to start these businesses and risk everything in the pursuit of a dream. They need to understand what it means to make a payroll when they can’t print the money, and what it means to spend their own money instead of someone else’s. A good first step would be to add at least one member of the small business community to the President’s Job Council, which hasn’t met since January.
The gap is huge. Our task is challenging. But America’s economic future depends upon the success of our efforts. Failure is not an option.
Tasti D-Lite and Planet Smoothie CEO Jim Amos has more than 30 years of experience guiding successful franchise companies such as Mail Boxes Etc. He is the co-author of The Tasti D-Lite Way: Social Media Marketing Lessons for Building Loyalty and a Brand Customers Crave (McGraw-Hill), and was inducted into the International Franchise Association’s Hall of Fame in February.