Poll Finds Small Businesses Wary of Fiscal Cliff, Looking for Pragmatic Fix

John Arensmeyer

As Fairfax, Va., small business owner Mike Brey prepares to close the books on 2012, he’s also starting to make expansion plans. But he hasn’t sealed the deal on his two new Hobby Works stores yet — largely because of growing economic uncertainty as we race toward the edge of the “fiscal cliff.”

Mike isn’t the only entrepreneur who’s worried about how business will stand up to the fiscal cliff. In fact, the vast majority of entrepreneurs, 78 percent, are familiar with this situation, marked by a host of tax increases and billions of dollars in automatic spending cuts to begin Jan. 1 if lawmakers don’t devise a plan to reduce the deficit by then. According to a scientific opinion poll Small Business Majority released this week, strong majorities of entrepreneurs are concerned about nearly every fiscal cliff issue they were asked about.

Polling also indicates that these job creators want spending and tax policies targeting the majority of small businesses to be preserved and ones that benefit only a few removed. By nearly a 2:1 ratio, they believe spending cuts for education, healthcare and infrastructure would hurt the economy more than a tax increase on the wealthiest 2 percent.

Similarly, the majority of respondents — more of whom identify as Republican than Democrat, an important distinction given the partisan nature of this debate — also agree raising taxes on the wealthiest 2 percent is the right thing to do in light of our budget crisis. Tax cuts for high-income earners simply aren’t targeted at the vast majority of small businesses, and therefore won’t help them or their customers, the middle class. That’s why a sweeping 86 percent of small employers oppose raising tax rates on households with income below $250,000.

Mike Brey noted that from a business perspective, what he’s most concerned with is consumer demand. That’s what drives his decisions to open new stores, create new jobs and further invest in the company. For demand to be there, he said, “We need to ensure middle class taxpayers have spending money. That means keeping their tax rates where they are now rather than letting them go up, and extending the employee payroll tax holiday so consumers don’t see smaller paychecks next year.”

More than three-quarters of small business owners are worried about a potential 2 percent increase to the employee share of payroll taxes, and more than half are very worried. This tax cut saves the typical household $1,000 annually. Its expiration could lower workers’ take home pay and inhibit customer demand, while also leaving less money in entrepreneurs’ own pockets.

When entrepreneurs have more cash in their coffers, on the other hand, they can invest in their businesses in many ways–by purchasing new equipment, for instance. That ability to invest is also tied to the fiscal cliff. More than eight in 10 entrepreneurs are anxious about impending cuts to the amount of qualified capital investments small businesses can expense.

Small business owner Eric Blinderman, owner of restaurants Mas (farmhouse) and Mas (la grillade) in Manhattan, would love to see an increase in the dollar amount of capital investments small businesses can expense, rather than the major decrease scheduled to kick in. “I’d be far more inclined to invest in new equipment for the restaurants if I could expense more of it. That saved money would go directly back into the economy by helping me expand and create new jobs,” he said. Small business owners across the nation clearly agree with him, as polling found 76 percent are supportive of letting small firms expense these investments up to $1 million.

In addition to tax increases, entrepreneurs are also concerned about spending cuts to occur if no action is taken. About two-thirds find $500 billion in defense cuts over the next 10 years worrisome, as these cuts would impact small businesses working as defense subcontractors. More than three-quarters are worried about infrastructure cuts. And there are several lifelines providing assistance for small businesses that owners show concern over: 68 percent are worried about funding cuts for government contracts and 62 percent are concerned about funding reductions for small business loan and counseling programs under the Small Business Administration (SBA).

Having utilized SBA loans to help build their businesses into the success stories they are today, both Mike and Eric can attest to the importance of robust policies that provide the targeted support small firms need. Across the nation, entrepreneurs are looking for a balanced approach to spending and tax revenues that is mindful of our deficit. But they’re also cognizant of the fact that our economy isn’t out of the woods yet, and we need to foster job growth. Pursuing policies that target the majority of small businesses, not just a few, is a promising way do that.