When the Labor Department job numbers for October came out showing that 128,000 jobs were added nationwide last month, The New York Times headline was “Job Market Shows Resilience.”
What the headline and story didn’t tell the reader was that businesses with fewer than 20 employees shed 12,000 jobs in October, according to the ADP National Employment Report that monthly looks at all sizes of businesses.
In fact, in four of the past six months these very small businesses have shed jobs. The net job loss since May has been 112,000 for these small businesses according to ADP.
Not only are these small businesses not creating jobs, the United States is at a near 40-year low in new business startups.
Our economy is facing a crisis since economists tell us that essentially all net new jobs come from small businesses that are less than five years old with fewer than five employees.
Fortunately, U.S. Senator Tim Scott, R-S.C., has been focusing on the small business start-ups.
Back in March, he and Sen. Amy Klobuchar, D-Minn., formed the bipartisan Senate Entrepreneurship Caucus to “diagnose the causes of this ‘start-up slump’ and formulate a comprehensive strategy to counteract it.”
Now Scott and Klobuchar have introduced the “Enhancing Entrepreneurship for the 21st Century Act,” which calls for the Department of Commerce to “conduct a comprehensive study into the underlying factors driving the current ‘start-up slump.’”
This study will look at numerous possible factors for the low rate of small business creation. One of those factors will be access to capital.
Another U.S. senator, Ron Wyden, D-Ore., has also recognized the problem in small business growth and is focusing on using federal tax incentives to address the capital needs part of the solution.
He has introduced the PROGRESS Act (Providing Real Opportunities for Growth to Rising Entrepreneurs for Sustained Success).
Wyden is especially concerned with expanding “women entrepreneurs’ access to capital.” He cites data showing that despite a dramatic increase in women-owned businesses, their overall share of business revenue continues to be only 4%.
However, both women and men small business owners will be helped with access to capital under the PROGRESS Act.
First, the act would establish a first employee tax credit to help the small business owner hire the first employee, a major step toward growing a business and job creation.
The tax credit would be “equal to 25% of W-2 wages” and “claimed annually, up to $10,000 in a single year, with a lifetime limit of $40,000.” The credit can be used against income tax or payroll tax.
Second, the act would create an investor tax credit to encourage non-owners to invest in a small business. Today such equity investment is almost non-existent for the very small businesses we need to grow and be sustainable.
In a world that seems only to be concerned with big business, the efforts of Sens. Scott, Klobuchar and Wyden are very much appreciated by the small business owners that make our economy strong.
Frank Knapp Jr. is president/CEO of the South Carolina Small Business Chamber of Commerce and co-chair of Businesses for Responsible Tax Reform.
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