Why We Celebrate Small Business
This week is Small Business Week. From an economist`s perspective, there is no other group that deserves more recognition than these risk takers and innovators who drive America`s economy.
In a proclamation issued last month, President George W. Bush declared: `The entrepreneurial spirit of America is robust and strong, and small businesses are thriving throughout our great Nation. The opportunity to own a business is an important part of the American dream.`
Indeed, small business growth is important to our entire economy. It should be obvious that all businesses, at one time or another, started out small - from Wal-Mart to Microsoft. The firms that invented, innovated, became more efficient, and met or created consumer demands thrived, added jobs and fed economic growth.
No matter how one looks at the data, it is undeniable that small businesses are the engines of job creation. Some large businesses add employees, while others cut jobs. The same goes for small, entrepreneurial firms striving to survive and grow. Some consider this a great revelation or even criticism of small businesses, when in fact it`s just how the economy works. In the end, though, the bulk of net new jobs obviously come from small, growing firms.
The President noted this fact: `Our economy has created almost 5 million jobs since August 2003. Small businesses create most new jobs in our country, and small businesses have been a driving force behind America`s tremendous economic growth and job creation.`
The SBA`s Office of Advocacy points out that businesses with fewer than 500 employees employ half of all private sector employees, pay 45 percent of U.S. private payroll, and create between 60 percent and 80 percent of net new jobs in the economy.
Entrepreneurs and small businesses deserve a policy climate where all kinds of enterprises have the opportunity to flourish. As the President declared: `By adopting sound economic policies that help small businesses continue to grow and expand, we will keep our economy moving forward and create more jobs for American workers.`
With respect to taxes, health care costs, trade, and lawsuit abuse, the proclamation asserted: `We are working with the Congress to make the tax relief permanent and to pass Association Health Plans to allow small businesses to join together and buy insurance at the same discounts big businesses receive. We are encouraging small business owners and employees to consider health savings accounts, which help small businesses provide health insurance for their workers and give consumers greater flexibility in how they spend their dollars. We also are continuing to work to open new markets for American products and services abroad. Putting a stop to the frivolous lawsuits that drive up the cost of doing business will further help small businesses enhance the quality of life for their employees and their communities.`
These are crucial points for all kinds of businesses. For example, making key aspects of the 2001 and 2003 tax relief measures permanent, including lower personal income, capital gains and dividend tax rates, expanded expensing levels for capital investment, and the phasing out of the death tax, would provide an important boost to entrepreneurs, investors and the economy. For good measure, policymakers need to rollback onerous regulations.
While all businesses would benefit from such measures, studies show that small, entrepreneurial firms get hit hardest by burdensome taxes and regulations.
Elected officials should celebrate Small Business Week by freeing entrepreneurs to do what they do best - create, innovate and grow the economy.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
