Despite inflationary pressures and exercising more caution over spending habits, Americans remain eager to support local small businesses and independent online marketplace sellers.
Last Saturday marked the 14th annual Small Business Saturday celebration–a shopping holiday first launched by American Express in November 2010. But it’s not just a credit card company gimmick; it’s a meaningful celebration of Main Street’s invaluable socio-economic contributions. And there’s no harm in declaring you “Shop Small.”
How could one not support small businesses? There are over 33.2 million of them operating in the U.S. today. These enterprises employ about 62 million individuals–or 46.4% of private sector employees. It’s no wonder small businesses are consistently ranked the most trusted U.S. institution in the country year-after-year. A July 2023 Gallup poll found support for small businesses hovered at a solid 65% compared to public schools (26%), organized labor (25%), and Congress (8%), for instance.
“Small businesses provide an incredible opportunity for individuals to pursue economic freedom. Small businesses create new and innovative products and services, increase choice for consumers, increase employment choice for employees and contractors, and add value to the local and national economies,” writes Carol Roth, a bestselling author and small business expert. “The presence of small business serves as much-needed competition to larger businesses in a variety of industries, helping to balance out economic power and domination.”
Roth added, “But, don’t just shop small out of pity; small businesses provide a number of benefits that can’t be matched by larger competitors. From specialized products to customized service, you can build a relationship with a small business and get to know its owners and other key personnel that make that specific business thrive. It creates a special bond when you can develop that kind of relationship with a company and its staff.”
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While support for small businesses remains strong, small business owners and workers, naturally, worry about the future conditions befalling the economy. Inflation, unfortunately, still weighs heavily on business owners and rightly so.
A recent National Federation of Independent Business (NFIB) Small Business Optimism Index fell to 90.8 in September 2023. NFIB described this as ”the 21st consecutive month below the 49-year average of 98.”
Not only does inflation weigh heavily on small business owners, onerous regulations are taking a toll as well.
For instance, President Biden’s Fiscal Year 2024 budget contains a $4.7 trillion tax hike–with $1.8 trillion in new taxes targeting Main Street. This specifically includes a $650 billion Small Business Surtax on independent owner-operators, a $235 billion tax on non-corporate businesses, and almost one million “C-corp businesses” facing a 33% tax increase.
More troubling is a controversial American Rescue Plan of 2021 provision targeting the smallest creators out there – third-party sellers– with a 1099-K form triggered for transactions exceeding $600. However, even Biden’s Internal Revenue Service (IRS), of all entities, has trouble with enforcing it.
Leading up to Thanksgiving, the IRS announced, yet another, delay in this new policy that would have adversely impacted upwards of 44 million Americans. The agency said it would temporarily increase the reporting threshold to $5,000 until it can “sort out” enforcement of the new reporting threshold.
“Given the complexity of the new provision, the large number of individual taxpayers affected and the need for stakeholders to have certainty with enough lead time, the IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold enacted under the American Rescue Plan (ARP),” their statement reads.
The Government Accountability Office (GAO) explains this will cause unnecessary confusion for 30 million new 1099-K recipients: “Many taxpayers will receive Form 1099-Ks who did not in the past, which may help some taxpayers comply. But, despite IRS communication efforts, it also may exacerbate confusion among some taxpayers, such as gig workers, who may not understand the taxability of their payments and taxes owed.”
Not only does this create confusion, it invites invasive privacy violations by the IRS on casual third-party sellers who are required to list Social Security numbers for minimal transactions.
As I noted at Townhall back in June, there’s no justification to ruthlessly tax and target third-party sellers:
A typical casual seller makes an annual average of $5,000 or less in sales — hardly a profitable target for the IRS. Regular participants are reselling second-hand items they obtained without original receipts. If this rule proceeds next tax season, it will impose a burden of proof on these sellers who could, in turn, be liable for income tax on items sold.
While casual marketplace sellers can breathe a slight sigh of relief today, the IRS doesn’t extend mercy like this often. On the contrary, the government’s chief tax enforcer is often uncharitable.
A true celebration of a “generous” gesture should come when the original $20,000 reporting limit for 200 transactions is permanently restored by Congress via the Congressional Review Act (CRA). While I’m encouraged to see bipartisan support for increasing 1099-k reporting threshold limits to $5k, $10k, and the original $20k amount, there’s little appetite by President Biden to invalidate this key American Rescue Plan act provision.
Whether brick-and-mortar, e-commerce shops, or independent sellers, small businesses are the backbone of America. Beware of disingenuous folks who feign support for small business yet back onerous regulations on them.
