Kerrigan Appears Before House Financial Services Committee Hearing on “Empowering a Pro-Growth Economy”

By at 21 June, 2018, 11:47 am

On June 20, 2018, SBE Council President & CEO Karen Kerrigan testified before the House Financial Services Committee on the topic of “Empowering a Pro-Growth Economy by Cutting Taxes and Regulatory Red Tape”.  Kerrigan reported on how the “Tax Cuts and Jobs Act” is positively impacting small businesses, the economy, investment, wage growth, and overall small business and consumer confidence.  She then went on to discuss how other reforms being considered by the Committee, or that have already advanced, would benefit capital access and capital formation. As noted by Kerrigan, these reforms would “enable entrepreneurs and their firms to take full advantage of opportunities in the growing economy.”  Read Kerrigan’s opening statement below:

Opening Statement of Karen Kerrigan

President & CEO, Small Business & Entrepreneurship Council

Before the U.S. House Financial Services Committee

June 20, 2018

“Empowering a Pro-Growth Economy by Cutting Taxes and Regulatory Red Tape”

Read Karen Kerrigan’s written testimony here.

Thank you Chairman Hensarling.  Ranking Member Waters and members of the committee, it is an honor to be here this morning to discuss how tax relief is helping the economy and small businesses, as well as to discuss additional reforms that would be helpful to enable entrepreneurs and their firms to take full advantage of opportunities in this growing economy.

This Committee and its members have been very helpful in advancing important legislation to improve capital access and capital formation, and many of these bills have been supported by my organization. And on behalf of SBE Council, I thank you for your leadership and your work.

House Financial Services Chairman Jeb Hensarling (R-TX) greets SBE Council president & CEO Karen Kerrigan at the start of the hearing: “Empowering a Pro-Growth Economy by Cutting Taxes and Regulatory Red Tape” on June 20, 2018

In my written testimony, I note an array of reform bills to improve capital formation – most of which are strongly bipartisan – and these are especially timely and needed given strong small business optimism, their positive outlook on the economy and their future plans for expansion, hiring and investment.

Small business optimism has remained strong and consistent for over a year and a half, and has been buoyed by the Tax Cuts and Jobs Act. Regulatory certainty, followed by tax relief, has been a powerful policy mix that has markedly improved the business environment, revenues and sales for small businesses, and their growth opportunities.

All the key surveys that measure small business confidence are consistent in their findings: confidence is exceptionally high. And by some measures has reached “historical highs.”

The views of our members are consistent with these surveys and with the findings of indexes that have reported on the effects of the new tax law – it is providing them with extra capital to compete in the economy. The Spring 2018 Bank of America Report found that entrepreneurs identified the new tax law as “game-changing” for the health of their businesses:

71% expect to receive savings from the new tax law, and many plan to use these funds to fuel growth, including: investing back into their business, providing raises and bonuses, hiring more employees, expanding operations, paying off loans, and making capital improvements.

A May 2018 Lending Tree survey shows similar results with 65% of small businesses expecting to see tax savings. Again, these savings are being channeled to productive use, and whether entrepreneurs decide to pay off loans, make capital improvements, increase wages, or hire more workers – each and all of these actions are important to the health and viability of their firms, as well as for the strength of the economy.

Looking forward, small business outlook for the future of their firms and the economy is very positive:

The BOA reports finds that 60% say their revenues will increase for 2018 and the same percentage plan to grow their business over the next five years.

This positive economic environment is being sustained by solid consumer confidence and stronger business investment, and I note the specific numbers in my written testimony.

So moving forward, I’ll wrap up where I began and that is access to capital. It is more important than ever that the bills – the reforms – advanced by this committee – and the full House in many cases – make their way into law.

The Helping Angels Lead Our Startups Act, Fostering Innovation Act, Encouraging Public Offerings Act – among others – all include common sense reforms that will improve the capital access and lead to powerful results for entrepreneurs and small businesses.  The latest bills considered by the committee – the Main Street Growth Act and Small Company Disclosure Simplification Act, for example – will do the same.

We believe it’s also time to explore and implement reforms to regulated (or Title III) crowdfunding. It is doing what its supporters, like us, hoped it would and with some updates to the JOBS Act the early and positive successes will grow exponentially.

Also, thankfully the Congress is updating thresholds across many areas of the law, and the same needs to be done with Section 1224 Small Business Stock, which allows investors to deduct losses taken on investments in C Corp startups. The current thresholds were last updated in 1978.

These last two items I mentioned along with the other reforms championed by this committee are critical to helping entrepreneurs and startups take advantage of growth opportunities in the current economy. They could play a significant role in mobilizing capital and fueling the success of the Opportunity Zones that have been established by the new tax law.

In conclusion Mr. Chairman there has been great progress for entrepreneurs and small businesses, more work needs to done. SBE Council stands ready to work with you and committee members to ensure vibrant and competitive capital markets for the U.S., which in turn will help entrepreneurs and promising firms access the capital they need to grow, innovate and compete. Thank you.

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