Thomas M. Sullivan Vice President, Small Business Policy

Published

November 17, 2021

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Small business makes up the backbone of our nation’s economy. There are 31.7 million small businesses in America, which account for 99.9 percent of all U.S. firms. Small businesses have created just under two-thirds of new jobs added since 2000 and employ just under half of the private sector workforce.

Coming out of the pandemic, small businesses are facing several big challenges including finding workers for their open positions and navigating supply chain disruptions. Several provisions that have been discussed as part of President Biden’s reconciliation spending bill will only create more headaches.

Here are three reasons the reconciliation bill could come at a serious cost for small business owners and is a threat to our nation’s fragile economic recovery.

More federal stimulus will drive up already out-of-control inflation.

Keeping up with rising costs for supplies during ongoing supply chain disruptions is already creating a huge burden on small business owners. For example, Adam and Amy Fazackerley, owners of bag company Lay-n-go, said the cost of a 40 foot container to ship product from Southeast Asia to the United States around this time of year was previously $5,000. The price is now $25,000.

Julianne Weiner, COO of Sonic Promos, a marketing company specializing in promotional products, says client demand has tripled since this time last year.

"Dealing with incoming requests is like trying to take a sip from a fire hose. The entirety of the supply chain impacts our business…material availability, production times, delivery dates, inflation," says Weiner. "Since lack of materials and low staffing levels at our partner factories makes processing every order more challenging, things that could be done in 48 hours now takes two weeks. Things that normally take two weeks take four."

The supply chain challenges are leading to rising costs for businesses and consumers—and another massive influx of federal stimulus will spike inflation up even further.

According to the U.S. Chamber and MetLife’s latest Small Business Index survey, 72 percent of small businesses said managing higher costs due to inflation is difficult. Seventy-three percent said rising prices have had a significant impact on their business in the past year. It was second-most cited challenge behind revenue concerns.

The tax hike aimed at “billionaires” punishes entrepreneurs.

Catchy slogans like “raising taxes on billionaires” hide efforts included in the reconciliation spending bill to penalize investments in innovative start-up companies and entrepreneurs.  

Eighty-six percent of the businesses that receive investment capital (venture capital, angel investors, private equity) are small businesses. By putting higher taxes on investments, the provisions will drive wealthy investors away from investing in entrepreneurial ventures and, instead, they will look to investment portfolios that are risk averse.

It’s a bad time to punish entrepreneurs. New businesses are opening at their highest rate since the U.S. government began tracking start-ups 17 years ago, and it took business startups more than 10 years to bounce back after the 2007-2009 recession.  We should be applauding post-pandemic startups, not thwarting their access to capital and growth.

Small businesses could face financial penalties they cannot afford.

The reconciliation bill would give federal agencies additional power to place fines on small businesses. Under the proposed legislation, small businesses could face up to $100,000 per citation from the National Labor Relations Board (NLRB)—double the current amount—for actions deemed “anti-union.”

While most federal agencies admittedly need funding for technology upgrades and modernization, it is concerning that the reconciliation bill’s $80 billion for the Internal Revenue Service (IRS) coincides with plans for increased audits and fines. The IRS should be helping small businesses figure out the dozens of tax changes enacted throughout the pandemic to help Main Street recover instead of pushing its agents to audit more small businesses.

About the authors

Thomas M. Sullivan

Thomas M. Sullivan

Vice President, Small Business Policy

Thomas M. Sullivan is vice president of small business policy at the U.S. Chamber of Commerce. Working with chambers of commerce and the U.S. Chamber’s nationwide network, Sullivan harnesses the views of small businesses and translates that grassroots power into federal policies that bolster free enterprise and reward entrepreneurship. He runs the U.S.

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