As the new presidential administration’s first quarter came to a close, we wanted to know: How do entrepreneurs think their small businesses will be affected by the first entrepreneur-turned-president?
In March 2017, Infusionsoft partnered with TechValidate to survey 496 customers in the United States about the expected growth of their small businesses and their views on government policies that would positively or negatively impact their success. About 70 percent of the respondents identified as the owner of the business, with other responses coming from managers and administrators.
While respondents were overwhelmingly optimistic about the future—95 percent of respondents expected their businesses to grow over the next two years—it should be noted that Infusionsoft's sales and marketing software serves growth-minded small business owners. While the monthly Optimism Index from the National Federation of Independent Business has seen a surge in optimism since the November election, only 51 percent of respondents reported hiring or trying to hire in March 2017.
See the infographic below for a summary of responses from Infusionsoft customers.
The survey also included one open-ended question: “If you could influence one policy from the current administration to help your small business, what would it be and why?”
Here’s what small business owners and managers had to say about three consistent themes: tax rates, health care, and minimum wage laws.
Tax rates and laws
Anyone who’s ever glanced at an Internal Revenue Service document—like the 27-page instruction document for filing a corporate income tax return—knows that taxes are complicated.
The taxes paid by small businesses vary by city and state and by business entity type. According to the National Federation of Independent Business, three-quarters of small businesses are S corporations, limited liability companies (LLCs), sole proprietorships, or partnerships—“pass-through entities” that pay income tax at the individual rate, not the corporate tax.
In addition to local and state taxes, small businesses pay several types of taxes to the IRS:
Income tax: When federal income taxes aren’t automatically withheld by an employer, business owners pay estimated income tax, generally on a quarterly basis.
Self-employment tax: Employers cover half of employees’ contributions to Social Security and Medicare, so self-employed workers must pay 100 percent.
Employment tax: Small businesses with employees must pay half of employees’ contributions to Social Security and Medicare, plus federal taxes for unemployment.
Excise tax: Businesses in certain industries pay additional taxes related to the environment, fuel and transportation, and the sale of some types of vehicles.
What small business owners want
More than any other type of policy, the small business owners surveyed cited taxes as being detrimental to their businesses. Nearly half of respondents said tax rates and laws have a negative impact.
“Our biggest threat … is the government taxing us out of existence,” one anonymous respondent said.
In their requests for lower taxes, some respondents took aim at specifics from payroll taxes to annual business license tax certificate renewal fees. Others requested tax credits that would incentivize businesses to hire their first employees.
“Small businesses need less tax burden so they can grow, expand, and hire with less fear,” said David Musselmann, owner of Phoenix-based Paramount Financial, which specializes in equipment leasing and financing.
Several respondents said they just want the tax code to be simplified. “Too much paperwork, time, and money spent on filings,” one anonymous respondent complained.
Despite Republicans’ recent attempt to repeal and replace Obamacare, the Affordable Care Act remains the law of the land. Unlike larger companies, small businesses with fewer than 50 full-time employees aren’t subject to the mandate requiring employers to offer minimum essential coverage or else pay a penalty to the IRS. Still, since it went into effect in October 2013, the ACA has affected every small business—for better or worse.
The ACA introduced a new way for small employers to shop for insurance, the Small Business Health Options Program Marketplace, and a tax credit for some small businesses offering coverage. To qualify, small businesses must cover at least half of employees’ premium costs, have fewer than 25 employees with average annual wages of less than $50,000, and purchase coverage through the marketplace.
Under the ACA, the uninsured rate has dropped below 10 percent for the first time since the Great Recession—which proponents see as a measure of the bill’s success. Critics point to rising premiums as evidence of its failure: The U.S. Department of Health and Human Services said the average rates for Healthcare.gov plans in 2017 will increase 25 percent over the previous year.
What small business owners want
In the survey, 12 percent of respondents said Obamacare has had a positive impact on their businesses. “Keep the Affordable Care Act,” one anonymous respondent wrote, before adding a disclaimer. “Not likely, I know.”
Repealing the ACA was one of Trump’s central campaign promises. And according to the survey, many small business owners are on board: 42 percent said the ACA has had a negative impact on their businesses, with 23 percent of those saying it has a strong negative impact. Some respondents said they’d prefer a single payer system, while others argued for policies that create less government involvement and more free-market competition.
Art Mattson, owner of New Leaf Wellness in Oklahoma and Iowa, said ACA costs have inhibited the growth of his 50-employee business. An insurance broker priced the cost of adding a 51st employee at $370,000 annually.
“We honestly want to provide health insurance to our employees, but the current regulations make that prohibitive at best,” he said.
Myles Keough, owner of Spade Technology in Massachusetts, said the inability to afford competitive benefits packages makes his small IT firm less attractive to potential employees.
“When recruiting top talent, the large companies can provide better healthcare for less cost,” he said. “Every year, I have to announce to my team what the increase will be on their healthcare and what services they are losing.”
Minimum wage regulations
While the federal minimum wage has held steady at $7.25 per hour since 2009, minimum wage is on the rise in 21 states and at least 22 cities that passed wage increases in the 2016 election.
Small businesses in Arizona, Colorado, Maine, and Washington will see minimum wage increases of between 43 percent and 60 percent over the coming years. Minimum wage has surpassed $12 in areas like Silicon Valley and Washington, D.C., while workers in Seattle are paid a minimum of $15 per hour.
What small business owners want
Seventeen percent of respondents surveyed said state minimum wage rates have a negative impact on their businesses. In Colorado, Dan Hall said his business will struggle to keep pace with a minimum wage that’s gradually increasing from $8.31 to $12 by 2020.
“This has been the most significant political influence our business has seen since we started in 2009,” said Hall, who owns A New View, a window-cleaning business.
Some respondents argued that small businesses shouldn’t have to pay the same wages as larger companies. That’s already the case in California, where businesses with 25 or fewer employees pay a minimum of $10 per hour, while larger businesses must pay at least $10.50.
“I am fine with the ACA and cost increases I face,” one anonymous respondent wrote, “but I cannot be stretched any further with a wage increase.”