What small businesses want

Nation's Business, August, 1984

Cuts in federal spending and a fair crack at goverment contracts head a wish list hammered out by delegates to the Small Business National Issues Conference. A list of 41 policy recommendations has been presented to the White House and the Republican and Democratic platform committees.

The 100 delegates represented more than 5 million small business owners. The Washington conference was sponsored by the U.S. Chamber of Commerce, the national Federation of Independent Business, the National Small Business Association, Small Business United and the American Institute of Certified Public Accountants.

Delegates to the conference were chosen by those five organizations on the basis of involvement in small business issues at the state and local levels.

Issuing a call to balance the federal budget by limiting spending rather than increasing taxes, the delegates urged an immediate spending freeze--holding fiscal 1985 spending at 1984 levels--and a downward adjustment in the cost-of-living formula used for federal entitlement programs.

The delegates endorsed several steps to give small business parity with larger firms, particularly in the areas of government contracts and taxes. Federal policy should require the government to buy goods and services commercially wherever possible, rather than doing jobs itself, the delegates said, and small firms should have "maximum opportunity" for participation.

Because small business tends to be more labor-intensive than larger firms, the delegates opposed further payroll tax hikes. They called for sweeping simplification of tax rules on debt-equity ratios, inventory and payroll tax deposits.

U.S. Chamber Chairman Van P. Smith, head of the Ontario Corporation, a family of small firms with total sales in the $60 million range, challenged his fellow delegates to produce broadbased policy positions and to work to elect members of Congress sympathetic to small business.

"We must organize to elect those candidates who understand that . . . we are the creators of jobs, innovation, patents and progress," Smith asserted. "We must retire those elected officials who view small business as something to tax, regulate and harass."

The range of issues accorded top priority at the conference contrasts markedly with that produced by the 1980 White House Conference on Small Business.

Nearly all of the top 10 issues targeted in 1980 dealt with capital formation. Only one capital formation issue ranked in the top 10 this year--a proposal for legislation to establish small business participating debentures.

It is believed such legislation would encourage private investment in small firms. Investors would get a fixed rate of interest, as they would with other debt instruments, and they would participate in earnings, with their earnings shares taxable as capital gains. No to Domestic Content

Thousands of small firms will be hurt if Congress enacts domestic content legislation for automobiles, says the federal government's small business ombudsman.

Frank S. Swain, chief counsel for advocacy at the Small Business Administration, wrote to Senate Commerce Committee chairman Bob Packwood (R-Ore.) that the legislation would harm auto dealers and small firms that service the auto industry.

Swain says that a domestic content law, which would mandate inclusion of more American-made parts in foreign autos, could result only in higher car prices and in lower sales and employment in auto-related industries.

"Small businesses are averse to seeing the United States set such a precedent," Swain wrote. "If Congress approves the domestic content legislation, there would then be strong demand for similar restrictions in other industries.

"Small manufacturers of a variety of goods rely on imported products and supplies to remain competitive," he continued, "and the higher costs associated with domestic content requirements would significantly reduce their competitiveness."

A recent Heller/Roper Small Business Barometer poll showed small business executives overwhelmingly opposing domestic content legislation. Gains in Insurance

Competition and changing views of underwriting losses are reducing insurance costs and allowing small firms to benefit, reports an accounting firm.

Harvey D. Moskowitz, national director of accounting at Seidman & Seidman, explains that, historically, insurance companies have regarded underwriting losses as intolerable, and so premiums have been set high to avoid such losses.

These days, things are different. "Insurance companies now consider these losses the cost of obtaining investment funds," Moskowitz says, and premiums are correspondingly lower. Increased competition, caused by the entrance of new companies into the market, has also contributed to lower rates.

Savvy small business owners now ask brokers for competitive quotes from several insurers, Moskowitz says. He adds that a review of insurance needs also can reduce costs.

"Property and liability insurance coverage is costly but essential, and should be reviewed periodically," Moskowitz says. Self-insurance--whereby a business assumes a certain amount of risk--also can help reduce a company's annual insurance bill.