Small business is the lifeblood of the U.S. economy. American small businesses accounted for almost two-thirds of net new jobs created between 1993 and 2011 – a grand total of 11.8 million new career opportunities.
North Carolina is no exception: The state is home to more than 833,000 small businesses, which employ almost 1.6 million workers. Firms with less than 500 workers employ roughly half of North Carolina’s private workforce.
Small businesses are under attack by the federal government – and its long list of taxes and regulations. According to a recent poll of more than 400 small businesses released by The Job Creators Network (JCN), only one in five small businesses plan to hire new employees next year. And nearly three-quarters of small business owners believe that they will have a more difficult time conducting business in 2016 than they did in 2015.
The reasons are twofold: Overtaxation and overregulation. Two-thirds of respondents reported that high taxes threaten the viability of their business, while 60 percent said the same about government red tape.
Tax compliance costs, for example, are two-thirds larger for small businesses than large corporations, totaling as much as $19 billion per year.
Yet small businesses – which naturally possess fewer resources than their larger counterparts – are much less equipped to deal with high taxes and the government’s complex tax filing system.
That’s why Congress has introduced the Bring Small Businesses Back Tax Reform Act, a bill which would reduce the tax burden on small business owners – who currently pay a marginal federal tax rate of 40 percent – and leave them more money to spend in other areas.
The legislation would reduce the tax rate for pass-through businesses to 10 percent on their first $150,000 in earnings and 20 percent on earnings between $150,000 and $1 million, allowing these job creators to invest in business expansion and hire additional employees.
To foster America’s next generation of entrepreneurs, legislators should commit to bringing small businesses back – and providing desperately needed tax and regulatory relief so that these businesses have the cash flow to expand and create jobs.
Robert Luddy, a major donor to conservative political causes, is founder and president of Raleigh-based CaptiveAire Systems, a once-tiny startup that now employs 1,100 workers.