Small businesses might be giving Washington a warning signal to get tax reform passed soon.
While the MetLife & U.S. Chamber of Commerce Small Business Index for the fourth quarter continues to show increasing optimism, there’s a growing gap between local and national economic optimism that should give lawmakers pause.
First, some topline numbers. The Q4 Index rose to 63.2 from 62.3 in Q3 and 60.6 in Q2.
About the same majority of small businesses (57%) expect revenues to increase in the next year as did in Q3 (56%). Manufacturing and resources businesses saw the biggest increase in revenue optimism, soaring from 51% to 62%.
The share of small businesses who expect to invest more in their firms has been steady, increasing slightly from Q3 (25% vs. 23%).
When you dig deeper into the index, you find an interesting separation between small business views towards their local economies and the national one.
While confidence locally went up — 48% felt “good” in Q4 — confidence nationally fell to 38%, down three points from Q3.
What’s more, this confidence gap grew from a five-point gap in Q3 to a ten-point gap this quarter.
This widening gap appears even though the stock market has been booming and the unemployment rate is at a 17-year low.
This could be from perceived ineffectiveness in Washington. While the Trump administration and Congress have been clearing out unnecessary regulations from the previous administration, health care reform got stymied this summer and may have frustrated small businesses who eagerly want tax reform.
It certainly makes passing the first major tax reform package in 31 years much more an imperative for Congress and the White House.
Washington understands the urgency and is moving the pro-growth tax reform ball down the court. President Trump and the White House are actively selling the need for reform, while progress is being made on Capitol Hill. This week, the House of Representatives passed its version of tax reform, and the Senate Finance Committee approved its package. Things look on track for achieving the goal by the end of the year.
Small businesses want it done, and our economy would certainly welcome it.
Correction: I noted that national confidence fell 38% in Q4, when I meant confidence fell "to 38%." My apology for the error.
Tell Congress: The time is now for tax reform.