PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

The Lame Duck Agenda: Unfinished Policy Business for Entrepreneurs

By at 12 November, 2018, 1:45 pm

Small Business Insider

Policy matters: Let’s keep the economy growing and working for entrepreneurs and small businesses.

The 3 Key Areas: Access to capital via JOBS Act 3.0, cost certainty with HIT Tax Relief, regulatory improvement and reform

By Karen Kerrigan

Congress reconvenes on November 13, and there is much work to do before the 115th session ends sometime in December.  America’s entrepreneurs remain confident about the economy, but it is important that this Congress continue to address key issues and pain points, which will help fuel optimism and growth going into 2019.

With the House switching political parties for the 116th Congress, observers predict that “divided government” will translate into fewer things getting done over the next two years.  While I do not fully share that observation, it is the case that full-bodied, growth-oriented legislation and reforms are going to be rare.  Instead, we may have the opportunity for targeted reforms. But at the same time we are expecting more regulatory-like bills getting passed by the House, with many being blocked in the Senate.

So there is definitely a sense of urgency to do more right now.

It is imperative that Congress “lock in” the policy gains made over the past two years (that have helped to fuel economic growth and investment) by adding a few more legislative wins that will help small businesses.  Here is SBE Council’s to-do list:

Access to Capital:  JOBS Act 3.0

It’s the U.S. Senate’s turn to vote on the massively bipartisan JOBS Act 3.0 and move it to the President’s desk.  This capital markets modernization and improvements package passed the U.S. House by a vote of 406-4 in July. More Senate Democrats need to commit to voting YES, and that has been the focus of our activity for the past several months.

Entrepreneurs and small businesses require capital to leverage growth opportunities in the current economy and to start new businesses. JOBS Act 3.0 is a powerful package of bills that will modernize various securities rules, reduce red tape, and fix barriers that will improve access to capital and our capital markets. The package will encourage higher levels of capital formation, which in turn will boost U.S. entrepreneurship and help finance America’s most promising small firms and their innovations.

It would be a huge disappointment and missed opportunity if JOBS Act 3.0 did not make it to the President’s desk for his signature. This significant, bipartisan package must be a priority in the lame duck session and there is no reason why Democrats should oppose it!  Again, let’s look at the House vote – 406-4!  This powerful package will help fuel entrepreneurs and small businesses with the capital they need in 2019 and beyond.

Small Business Regulatory Improvements

In 2017, the House passed a strong package of regulatory reform bills. Similar pieces of legislation passed the Senate Committee on Homeland and Government Affairs. In late September, I testified about the need to advance these reforms to modernize the regulatory system and sustain policy stability, which will encourage entrepreneurs to take risks and operate with confidence. There appears to be bipartisan consensus on moving forward with reforms that would give small businesses a bigger voice in the regulatory process and ensure that new rules do not disproportionately harm this sector and our nation’s startup capacity.

The reforms embedded within the Small Business Regulatory Flexibility Improvements Act, for example, are common sense solutions that would promote transparency, accountability and small business engagement in the regulatory process. These are the types of changes that the federal rulemaking system needs in order to improve the quality and outcome of government regulation.

Many – if not all – members of Congress talk about the need to lift red tape and burdensome rules off of small businesses.  There is an opportunity to do that before the end of 2018, which will pay dividends in terms of healthy small business growth and entrepreneurship well into the future.

Health Cost Certainty: HIT Tax Relief Extension

The high cost of health coverage remains as a pain point for small businesses and the self-employed.  Recent reforms advanced by the Administration (changes, for example, to short-term-limited duration plans and health reimbursement accounts (HRAs), and the development of Association/Small Business Health Plans) will help to inject competition and choice into the marketplace.

Still, more needs to be done to unlock innovation and new models of coverage for the delivery of quality care at lower costs for entrepreneurs and their employees.

SBE Council has been a strong advocate for repealing the health insurance tax (HIT tax), as this unfair tax on health insurers is recouped via higher premiums on the self-employed and small businesses in the individual and small group markets.  Thankfully, in 2018, a one-year moratorium on the HIT tax (for 2019) was approved by Congress, but it is set to come back in 2020. That means higher premiums for small businesses.

The ideal policy solution is to repeal this unfair tax. However, extending the moratorium will provide relief – and certainty – for entrepreneurs and small businesses. A recent report by Oliver Wyman Actuarial Consulting found that 2020 premiums would likely increase by 2.2 percent due to the return of the HIT tax. The increase would remain for subsequent years.

For the self-employed and small businesses, that means increases ranging from $154 to $479 depending on the enrollee and product. Projected increases will amount to $196 per person in the individual market, and $154 per person and $479 per family increases in the small group market.

According to the report: “Over the next 10 years, this equates to premium increases ranging from $2,473 per person in the individual market to $5,824 per family in the small group market.”

(See a state-by-state and market by market breakdown of the Oliver Wyman report here.)

Even in a good economy, higher costs put small businesses at a competitive disadvantage. When it comes to health insurance coverage, this key benefit allows them to compete with larger companies as they work to attract and retain the employees they need to scale and operate efficiently.

The current Congress, at a minimum, must extend the moratorium through 2020. Small businesses cannot afford new costs and surprises that undermine confidence and the growth of their businesses. Addressing the HIT tax would be a welcome piece of good news for our small business sector.

Entrepreneurs and Small Businesses Need a Policy Boost

The current, positive environment can be sustained with policies that generate certainty for small businesses. Entrepreneurs currently have a very favorable outlook for their firms and the economy. With a little more help from Congress during the lame duck session, 2019 can be another strong year for our small businesses.

Lower health coverage costs, more access to capital, and a regulatory system that is responsive to the needs of small businesses are key areas that will help our startups and small businesses better compete and thrive in the coming year. If the health and growth of small businesses are a priority for this Congress, there is no reason why these three critical areas cannot be addressed. There is plenty of time in this session to do so.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council       

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