But we should honor them anyway.
According to the Small Business Administration, a small business is "an independent business having fewer than 500 employees." That means 99.7% of all employer firms are small businesses; they employ over 50% of all private sector employees. They produce 13 times more patents per employee than large patenting firms. They provide the products and services we rely on. In today’s competitive and struggling economic environment, they live and die on their service commitment. In America, the impact of small business is not small.
Last week, after some criticism, President Obama delivered an inspiring speech to the youth of America. All join him in calling students to study hard, to develop their gifts into worthwhile and rewarding careers and to take personal responsibility for creating their own destiny. But I also wish he'd have encouraged our youth's dreams of becoming tomorrow's entrepreneur - the men and women who will start the businesses that will fuel our future. In America, you don't have to work for others. If you can find a way to do something better, faster or in a unique way, you can start your own company.
We need every small business entrepreneur we can get. In the face of what many fear will be a "jobless recovery," job seekers are realizing how important small business entrepreneurs are to America's economic health. In the last fifteen years, 64% of the new jobs created came from small business. The new winners in the great game of business provide the jobs Americans need. For our free enterprise system to work, we need labor, entrepreneurs and capital investors working together.
Today, successful business owners are often portrayed as greedy, but we often forget the money and time that was invested to make success possible. For many, their savings, and even their homes, are often on the line should they fail. They are often the last to be paid. There are no scheduled hours or holidays for the owner. For most owners, it takes a 24/7 preoccupation to nurse their small businesses through the ups and downs from birth to financial well being. Only 70% of new small businesses are still functioning after two years; only half survive five years. While the number of unincorporated self-employed has remained steady in 2009, the number of larger, incorporated self-employed has dropped by half a million since 2008. Unfortunately, it's those larger, successful firms that hire the most employees.
It's also clear that the surviving, successful small business owners will be some of the citizens hit hardest by President Obama's proposed tax increases. Bill Rys, tax counsel for the National Federation of Independent Business, reports that about 10% of small business owners make more than $250,000, but 30% of those with 20 to 250 employees exceed that level of taxable income. The recent recession has most certainly decreased the income of many small business owners, but those owners facing higher taxes are the very people we want to hire more workers, not cut back on their businesses.
These same small business owners are not only facing higher taxes and continuing economic uncertainty; they see future costs coming out of Washington, which include cap and trade restrictions, expanded healthcare obligations and increased regulations. Regulations and government mandates hit small business hardest. According to the Small Business Administration, it costs firms with 20 or fewer employees 45% more per employee to comply with federal regulations. It's clear that President Obama "cares" about financial giants "too big to fail" and companies like GM and Chrysler with lucrative labor union contracts. But where's the support for the small businesses? Ninety-eight percent of small businesses, America's primary job growth engine, are getting no stimulus money.
Instead, they get added costs and taxes.
Although the credit picture has improved, getting loans to fund capital investment remains difficult for small businesses. While government borrowing has exploded to unprecedented levels, corporate borrowing has dropped 50% and 80% for non-corporate small business borrowers. Forty percent of small business owners say that they can't get loans. Minority-owned businesses have been hit hardest.
President Bush's tax breaks for all tax-paying Americans helped America bounce back from the economic downturn in 2000 and after 9/11. Admittedly, his unwise spending and failure to push a reluctant Congress to regulate and reign in the mortgage excesses at Fannie Mae and Freddie Mac contributed to our recession. But Obama's plan to raise taxes on the one segment of the population that provides the capital investment and job growth needed for a robust recovery is unwise and short-sighted. Today, it's time we honor rather than take advantage of these inspiring men and women whose businesses serve us all.