New Small Business Check Up Survey: Wariness on Inflation, Economic Uncertainty Weighs In Heavily this Election Season

By SBE Council at 30 October, 2024, 2:14 pm

Trump is Favored Over Harris for the Presidency, 50%-43%

Washington, D.C. – Despite their various challenges, small business owners feel generally positive about the economy, according to the Small Business & Entrepreneurship Council’s (SBE Council’s) latest Small Business Check Up Survey. As with previous surveys over the past two years, small business owners continue to express wariness about what’s ahead – namely the potential for an economic slowdown or recession. They continue to cite “inflation” as their top concern, followed by “the economy,” “a slowdown or recession,” and “economic uncertainty.” Rounding out the top five is “high taxes and expiring tax provisions.”

While there has been some easing on the inflation front, 81% remain concerned about inflationary pressure over the next twelve months and 78% are similarly worried about a potential slowdown or recession – 73% report they are planning or have taken active steps to prepare for a downturn, according to the survey.  On 14 out of 16 key issues, the former president and Republican nominee Donld J. Trump wins out over Vice President and Democrat nominee Kamala Harris in terms of who would better handle these issues as president.

“Inflation and the economy are the dominant areas of concern for small business owners. Given Trump’s edge over Harris on issues related to the economy and the health of their businesses, it is not surprising that the former President is currently winning the small business vote. However, Harris’s focus on ‘small business’ has resonated with entrepreneurs. She ties with Trump or has the slight edge when it comes to competency on handling small business issues and on the question of which candidate is more sincere in their support for small business. Yet, it appears that the rub comes down to policy details and known leadership on the key issues of concern. Policy and track records matter, and Trump is currently winning out with small business owners in these key policy areas.”

According to Small Business Check Up Survey results on who would better handle key issues:

● On “growing the economy” Trump betters Harris 55% to 38%. (60% report slower sales and revenues are negatively impacting their business.)

● On their top issue of concern – “inflation” – Trump tops Harris 49% to 43%. (73% report inflation is having a negative impact on their business.)

● “Reducing regulatory burdens:” Trump leads Harris on this issue 48% to 37%.  (88% want the next administration to prioritize reducing regulatory burdens faced by small businesses.)

● On “tax uncertainty and reducing taxes:” Trump edges Harris 48% to 45%. If Harris becomes the next president, 60% expect an increase in business taxes and 54% expect an increase in personal taxes. (65% report high taxes and tax complexity is having a negative impact on their business.)

● On “securing the border” – prioritized as #2 on their list of “top issues facing the nation” (the economy ranks #1 and abortion is #3) Trump leads Harris 58% to 34%.

● On “solving the labor shortage:” Trump leads Harris 48% to 38%. (47% report that lack of access to skilled workers/the labor shortage is having a negative impact on their firms.)

● “Improving access to capital:” Trump wins out 49% to 40% (66% report higher interest rates are negatively impacting their business, and 57% say that the lack of credit and capital access is hampering their operating capacity.)

● On the issue of “high health insurance costs,” Harris leads Trump 49% to 40% (High costs continue to be a pain point for small business owners, and it is ranked #14 out of 19 issues identified in the survey.)

Small Business Plans or Steps Taken to Prepare for a Slowdown or Recession

Even though 74% of small business owners rate the economy favorably, they continue to look over their shoulder in terms of risks that could present more challenges for their businesses, observed Kerrigan.

“Small business owners are stuck with elevated costs due to a long period of inflation and various uncertainties are playing into their reserved outlook on the economy. It is not surprising that they are cutting back on investment and spending, which unfortunately affects the health of local economies,” said Kerrigan.

● 41% have cut spending across the board

● 41% are setting aside more capital to build their “rainy day funds”

● 37% have reduced or stopped hiring

● 31% have cut back on marketing and advertising budgets

● 27% are pausing expansion plans

● 27% have put borrowing on hold

● 24% are increasing their use of artificial intelligence tools

Tax Cuts and Jobs Act of 2017 and Expiring Provisions

With 85% of small business owners reporting varying level of benefits from the Tax Cuts and Jobs Act (TCJA) of 2017, it’s not surprising that those businesses that benefitted from the 20% small business deduction (Section 199A) would be negatively impacted by its expiration, if allowed to occur at the end of 2025. Of those utilizing the deduction (11% said they did not), 54% say they will be negatively impacted and 10% were not sure.

Small business C-corp respondents in the survey, report a range of benefits from the lower 21% corporate tax rate (made permanent by the TCJA). Of the small business C-corps surveyed:

● 51% said the lower 21% rate made them more competitive with larger businesses and international competitors

● 43% reported their business is now more resilient, and more resources allowed them to better navigate Covid-19 and inflationary pressures

● 40% said the capital provided by the lower rate allowed them to expand the business

● 38% reported they were able to expand job opportunities and offer competitive wages and benefits

● 34% said they are better positioned for acquisition or merger

● 32% said they had more resources to invest and innovate

SBE Council chief economist Raymond J. Keating observed, “As verified in this survey, the reduction in the corporate income tax rate to 21% in the 2017 tax relief measure clearly made a difference to C corps in terms of expanded competitiveness, business expansion and investment, as well as better pay for employees. And this is about small businesses, as more than 90 percent of C corps – employer and nonemployer firms – in the U.S. have fewer than 20 employees.”

Corporate Transparency Act (CTA) Compliance

The CTA compliance deadline for reporting “beneficial ownership” information to FinCen is rapidly approaching (December 31, 2024), and non-compliance could mean jail time or stiff penalties for small businesses that do not comply. Because there is a lack of knowledge among small business owners about the new law and the compliance requirements for most small businesses, legislation has been introduced in the Congress to both delay and repeal the mandate. The survey results confirm the lack of awareness, the widespread lack of compliance to date, and the urgent need for Congress to act on delaying the compliance deadline for one year.

● 54% of small business owners say they are familiar with the CTA mandate; 46%, are unfamiliar with the law and its mandate.

● 46% say they have filed the required information; 31% report they have not yet complied; and 23%, were uncertain about their compliance.

The SBE Council Small Business Check Up Survey of 584 small business employers was conducted by TechoMetrica and fielded October 11-21, 2024 (+/- 4.3 percentage points).

Read the full survey here.

CONTACT:

KAREN KERRIGAN, kkerrigan@sbecouncil.org

RAYMOND KEATING, rkeating@sbecouncil.org

SBE Council is a nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For nearly 30 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth.

Visit www.sbecouncil.org for additional information  X: @SBECouncil