July 27, 2006
 
Mollohan Opponent Chris Wakim Outlines 5-Point Small Business Jobs Plan
 
From Chris Wakim for Congress Press Release
 
Wheeling, WV (HNN) – Small businesses are the growth engines for job creation in today’s economy. Small businesses account for almost 50% of non-farm jobs in the country and for the last 30 years, they have accounted for almost two out of every three jobs created in the United States.[1] Here in West Virginia, where workers are leaving the state in droves to find good, safe and well-paying jobs, we need to be doing everything we can in order to encourage people to start their own businesses, and for those small businesses that already exist, we need to be doing everything we can to encourage them to grow.
 
As it stands now, small businesses that want to expand are prevented from doing so by burdensome regulations, high compliance costs, disproportionately high taxes, unaffordable health care options for their employees, and predatory trial lawyers and their frivolous lawsuits. I have created a 5 point plan that will ensure that small businesses are given the opportunity to grow and that entrepreneurs who want to start a businesses are given every opportunity to do so.
 
Because I believe that every West Virginian should have the opportunity to live, work and raise a family here in West Virginia, the federal government needs to do everything it can to make it easier for small businesses to do what they do best: create jobs.
 
1. Reduce the Burdensome Cost of Compliance With Federal Regulations The annual cost of compliance with federal regulations for small businesses is almost $7,000 per employee.[2] For a small business with four or five employees, complying with federal regulations costs that firm the same as it would to hire a new employee.
 
Agencies of the federal government that issues these regulations are supposed to regularly study them to determine their effectiveness, but in many cases the reviews never happen. As a result, many ineffective and intrusive regulations remain on the books that small businesses are forced to comply with. If the federal government would cut red tape, get rid of these ineffective regulations and streamline the compliance process, each of these firms could use the money saved to grow their businesses and hire new employees, creating thousands of jobs for West Virginians in West Virginia-owned businesses.
 
2. Personal Income Tax Reductions Must Be Made Permanent
 
The National Federation of Independent Businesses regularly surveys small businesses and since 1986, small business owners have ranked taxes as one of their top concerns.[3]
 
Because 85% of small businesses file their taxes as individuals,[4] reductions in the personal income tax rate have a tremendous impact on the growth of small businesses. According to the National Federation of Independent Businesses, almost 60% of small business owners list after-tax earnings as their most important source of capital for their businesses.[5] A study by the former Chairman of the President’s Council of Economic Advisors on the effects of tax cuts on small businesses found that a 6% decrease in the top tax rate would increase hiring by 12%.[6] If the tax cuts that have been enacted since 2001 are allowed to expire, taxpayers will face $2.4 trillion in new taxes over the next decade.[7] That tax increase would have a disastrous effect on small business hiring.
 
It is absolutely essential to job creation in West Virginia for Congress to pass legislation that would make these tax cuts permanent.
 
3. Simplify the Tax Code
 
Aside from the actual taxes that small businesses pay, the cost of filing tax returns and forms is a major burden to small businesses. Small businesses must comply with up to 200 separate IRS requirements.[8] For instance, businesses that operate out of a home are especially hurt by the complexity of the tax code. In order to deduct business-related expenses, home-based business owners must maintain meticulous records.
 
Often, these businesses do not have the staff to allow for such time-consuming record keeping, and these business owners simply do not take the deductions they are entitled to. If a standard deduction were to be allowed for home-based businesses, this barrier would be removed.
 
As a result of the complexities, almost 85% of small businesses pay for professional tax preparation with money that could otherwise be used to expand their businesses and create jobs.[9] Congress must simplify the tax code to allow small businesses to avoid costly tax preparation and take full advantage of deductions allowed by law.
 
One of the first steps that must be taken is to reform the Alternative Minimum Tax (AMT). The AMT is an overly-complex tax code that was originally established to ensure that wealthy Americans paid their fair share of taxes, but it is now beginning to affect middle class taxpayers.
 
Without the temporary “patch” enacted earlier this year, the number of taxpayers affected would have skyrocketed from about 4 million in 2005 to 22.2 million in 2006,[10] 6.4 million of whom would be small business owners who file as individuals.[11]
 
Moreover, the AMT currently forces affected individuals and of small businesses that file as individuals to calculate their taxes twice and pay the larger amount. The extra costs associated with preparing taxes twice is another extraneous cost that takes away from small businesses’ ability to create jobs.
 
It is imperative that Congress pass a permanent reform of the AMT so that small businesses that file their taxes as individuals are not hit with an unexpected tax increase that would stifle job growth and are not forced to pay the costs associated with calculating their taxes twice.
 
4. Allow Small Businesses to Band Together to Purchase “Association Health Plans”
 
With the number of uninsured Americans on the rise, reducing the cost of providing health insurance to employees is in everyone’s interest. Large corporations can provide health insurance at a much lower cost because they purchase coverage at a much higher volume. Small businesses are forced to purchase coverage on a much smaller scale, which means that providing health care is far more expensive per-employee. Moreover, the cost of health care is rising rapidly. In 2004, the cost of employer-provided health care rose at a rate that was almost five times the rate of inflation,[12] making health benefits prohibitively expensive for many small businesses.
 
To help reduce the cost of providing health care, small businesses should be allowed to band together in “Association Health Plans” (AHPs) which would allow a group of small businesses to purchase coverage at a much higher volume. The Chamber of Commerce estimates that AHPs would save small businesses between 15%-30% of the cost of health care. Groups of small businesses would have a much lower cost-per-employee for health care, allowing more businesses to provide health benefits that they otherwise could not afford.
 
5. Pass Significant Tort Reform
 
Frivolous lawsuits are an increasing problem for small businesses. Junk lawsuits cost small business owners thousands of dollars in legal fees and have made the price of liability insurance unaffordable for 26% of small businesses.[13] Legal fees for frivolous suits can cost up to $20,000 and suits that go to trial cost at least $100,000. As small business owners typically make about $50,000/year, those fees are enough to put many small businesses out of business.[14]
 
To protect small businesses against claimants and attorneys who are simply looking for a big payday, Congress must pass effective reforms that curb this practice. The first step is to cap non-economic damages at a reasonable level that would fairly compensate legitimate claims, but would take away incentives for plaintiff’s attorneys to file suits simply looking for a big payday.
 
Along the same lines, Congress should make sanctions against lawyers for frivolous suits mandatory rather than discretionary as they currently are. Lawyers and claimants who consistently file frivolous suits need to be held accountable for the costs that their actions incur.
 
[1] NFIB, “Small-Business Growth Agenda for the 109th Congress”
 
[2] Crain and Hopkins, “The Impact of Regulatory Costs on Small Business: A Report for the Office of Advocacy”
 
[3] NFIB, “Small-Business Growth Agenda for the 109th Congress”
 
[4] NFIB, “Small-Business Growth Agenda for the 109th Congress”
 
[5] NFIB, “Small-Business Growth Agenda for the 109th Congress”
 
[6] Douglas Holtz-Eakin and Harvey Rosen, “Economic Policy and the Startup, Survival, and Growth of Entrepreneurial Ventures.”
 
[7] The White House, “ Economic Growth Continues - More Than 5.2 Million Jobs Created Since August 2003”
 
[8] NFIB, “Small-Business Growth Agenda for the 109th Congress”
 
[9] NFIB, “Small-Business Growth Agenda for the 109th Congress”
 
[10] The White House, “Extending the President's Tax Relief: A Victory for American Taxpayers.” May 17, 2006
 
[11] William Beech, “Testimony to the Subcommittee on Tax, Finance and Exports of the Committee on Small Business of the House of Representatives.” 4/14/05
 
[12] Kaiser Family Foundation, “Employer Health Benefits 2004 Annual Survey”
 
[13] NFIB, “National Small Business Poll [Liability] 2002”
 
[14] Journal of Commerce, 3/8/99