For Better Or Worse

Entrepreneur, March, 2001 by Stephen Barlas

Business forecast for the Bush years

Small-business groups hope their agenda doesn't get lost in the shuffle as President George W. Bush and the new Congress get down to the business of trying to get the economy back on track and addressing high-priority issues such as Medicare and Social Security.

Giovanni Coratollo, director of small-business policy for the U.S. Chamber of Commerce, says entrepreneurs shouldn't get complacent just because Republicans control the White House and Congress. For example, though all signs point to a tax-cut bill (possibly already in motion by the time you read this), the small-business community will have to be at the table and not take for granted that its interests will be protected. In a highly charged political environment where President Bush will have to find ways to compromise with an evenly divided Congress, apathy could result in the bargaining away of two of small business's key tax objectives: substantial reform of the estate tax and 100 percent deductibility for health insurance for the self-employed.

On smaller-dollar issues, where political stakes are lower, Bush is apt to be very sensitive to the needs of entrepreneurs. David Pinkus, president of Small Business United of Texas, points out that Bush, as governor of Texas, proposed a bill eliminating the need for Texas companies with less than $100,000 in annual sales to file state business income tax returns. (The Texas legislature went further, raising the limit to $150,000.) The bill affected 170,000 small companies. This portends well for the numerous tax and accounting issues that will have "small business" written all over them when they come tip in the next Congress--things like changing the way the IRS defines independent contractor status, Which the Clinton administration declined to do.

Another area that may benefit from the Bush touch is federal procurement. Small businesses have protested loudly during the past few Congresses about contract "bundling," where federal agencies such as the Defense Department and the General Services Administration combine a lot of little contracts into one big contract and award it to a giant prime contractor, all in the name of easier contract administration. At the end of the last session, Congress passed the Small Business Competition Preservation Act. But the bill does nothing to stop bundling; it merely tells the SBA administrator to collect statistics on bundling and submit a report to the House and Senate committees on small business. Bush, however, could bypass Congress and issue a directive to federal agencies. According to Mary Scott Nabers, chair of the Greater Austin Chamber of Commerce in Texas, Bush pushed hard for distributing state contracts while he was governor.

Bush will have an early chance to showcase his small-business bona fides when he names a Chief Counsel for Advocacy of the SBA. The Chief Counsel is responsible for persuading federal agencies to change proposed federal regulations that would hurt small businesses. Jere Glover, the Clinton Chief Counsel, was a bulldog who left his teeth marks on Capitol Hill. "He was well-respected on both sides of the aisle," says Damon Dozier, director of government and public affairs for National Small Business United. Bush's choice for Glover's replacement, perhaps more than anything else, will dictate whether small-business groups will have a big bite--or just a big bark--in Washington in the next few years.

Community development bill passes: Forty cities and counties will be designated "Renewal Communities" as part of a new HUD program authorized by the last Congress. The areas must have high poverty rates and a commitment from the local government to reduce regulation and taxes for the small businesses that locate there.

Stephen Barlas is a freelance business reporter who covers the Washington beat for 15 magazines.