Republicans in Congress announced “A Pledge to America” on Sept. 23 in an effort to unify around a set of ideas heading into the November elections.
But what does this pledge mean for small businesses and their employees, for entrepreneurship, and for the investors who supply businesses with the capital needed to start up, build, and create jobs?
On the tax front, the GOP’s first order of business to help small business is to permanently halt the big tax increases scheduled to take effect at the end of this year. That would be a clear positive and welcome certainty for both entrepreneurs and investors.
Second, the “Pledge to America” calls for repealing a costly tax mandate included in the health care bill passed earlier this year. It requires all businesses to report to the IRS any purchases topping $600. As noted in the GOP plan: “This 1099 reporting mandate is so overbearing that the IRS ombudsman has determined that the agency is ill-equipped to handle all the resulting paperwork.” Stopping this costly paperwork nightmare is a must for business.
Third, the Republicans say they will establish a tax deduction for small businesses worth 20 percent of business income. That could be a step in the right direction, though how small businesses are defined is not clear, and one has to wonder why the GOP simply did not call for an across-the-board reduction in tax rates. In fact, they say nothing about the U.S imposing one of the highest corporate income tax rates on the planet.
Meanwhile, a major improvement is suggested on the regulatory front. Congress is notorious for passing legislation that leaves the details of regulating to unelected regulators. That is a key problem with both the health care and financial regulation measures recently passed by Congress and signed into law by the President. The GOP agenda would require that Congress vote on any new regulations whereby the annual economic costs top $100 million. While all regulations should be voted on by Congress, this would be a significant rollback of “regulation without representation.”
As for the federal government’s chronic spending problems, solutions offered by these Republicans include canceling all unspent “stimulus” programs; reducing expenditures to pre-stimulus, pre-bailout levels, with some “common-sense exceptions for seniors, veterans, and our troops;” and capping the part of federal expenditures known as “discretionary spending,” though no cap amount is noted. If implemented, this would be a dramatic change in direction from where President Obama is pointing the nation in terms of government spending and the accompanying increases in taxes for individuals and businesses that would have to follow.
The Republican pledge is even bolder when it comes to ObamaCare. Nothing less than outright repeal can save individuals and businesses from skyrocketing costs, reduced health care innovation and investment, and decaying quality of care. To their credit, the Republicans pledge to repeal ObamaCare, while also implementing productive reform measures.
Those include medical liability reform; expanding choice and competition by allowing health insurance purchases across state lines; boosting tax-free health savings accounts by making them easier to use; and dealing with pre-existing conditions by expanding state high-risk pools, and implementing common-sense protections by making it “illegal for an insurance company to deny coverage to someone with prior coverage on the basis of a pre-existing condition, eliminate annual and lifetime spending caps, and prevent insurers from dropping your coverage just because you get sick.”
Finally, the GOP offers some reforms that will clarify and tame Congress’s “Wild West” legislative process. For example, sneaking measures into bills would be countered by “publishing the text online for at least three days before coming up for a vote in the House of Representatives.”
In various ways, Republicans lost trust with enough of the American people, including small business owners, that they lost Congress and the White House. Subsequently, and in an astoundingly short period of time, the Democrats have managed to anger wide swaths of the nation. The GOP now has a chance for redemption. The “Pledge to America” makes for a good start, and a solid pledge to small business as well.
Keating, chief economist for the Small Business & Entrepreneurship Council, can be reached at email@example.com.