Three small business-friendly policies to help cut expenses and cope with inflation
While there has been a slew of recent positive news about our growing economy, inflation is commanding all our attention. Unfortunately for Main Street Mom-and-Pop businesses, many elected leaders are choosing to use this as a cudgel to bash their opponents rather than doing the hard work of helping small business owners and their employees cope.
In 2021, the U.S. economy saw its largest year-over-year growth since 1984. The most recent jobs report shows the streak of strong gains continuing. And there is a boom in Americans interested in starting new small businesses. Yet, a new Small Business for America’s Future (SBAF) survey of 1,576 small business owners fielded this month shows Main Street entrepreneurs say inflation is their top challenge. For Main Street, this is the latest in a cascade of challenges set off by the Covid-19 pandemic. The difference is how many of our leaders are responding.
When the pandemic first hit this month two years ago, we saw remarkable bipartisan support for programs to help small businesses and their workers through the crisis. Now, we’re seeing gridlock. Indeed, many politicians are quick to blame the bipartisan federal relief programs they supported even though the stimulus and the Paycheck Protection Program saved thousands of small businesses, millions of jobs, and created today’s growing economy.
What we hear little about, or see action on, are the other causes of inflation that have had no benefit for the country. Chief among those are the large corporations that have been quick to raise prices while experiencing record profit margins. The Wall Street Journal reports that nearly 100 of the biggest publicly traded companies in the U.S. booked 2021 profit margins that were at least 50% higher than their 2019 margins. Overall, net profit margins for big business hit record highs in 2021. And of course the invasion of Ukraine has led to a spike in gas prices, but long before Putin rolled tanks to the border, the four major oil companies had been taking your extra dollars at the pump and using them for record levels of stock buybacks. We don’t have to guess what’s behind these business decisions—major corporate CEOs and CFOs have said it outright on their earnings calls.
This all is clear to small business owners, with 63% of those in SBAF’s March survey saying they think large corporations have been taking advantage of inflation to raise their prices on customers unnecessarily and increase profits.
To deal with the fallout of inflation and corporate greed, small businesses and their workers need solutions that cut expenses that eat into their bottom line and help increase the labor pool. Here are three things Congress can do:
First, lower prescription drug prices. Drug prices average 2.56 times higher in the U.S. than in other countries—a huge expense that contributes to inflation. One in three small business owners have raised prices on their goods and services specifically to offset employee healthcare costs. It’s no wonder the March SBAF survey shows 80% of small businesses strongly support reforms to reduce the cost of healthcare and prescription drugs.
Second, reduce the cost of child care. Fifty-five percent of small businesses support extending the child tax credit that put money in working families’ pockets and capping childcare costs for families. The January jobs report contained a stunning metric: Over 1 million men joined the workforce, compared to just 39,000 women. Women are being sidelined from the workforce due to a lack of affordable and accessible childcare. More women in the workforce will increase the ability for businesses to provide goods and services, therefore cooling inflation.
Third, Congress should temporarily suspend the federal gas tax and pay for it by increasing our very low corporate tax rate by 1-2 percent. This would ensure large corporations, which regularly work the tax code to pay little or no federal tax, are paying their fair share (something 65% of small business owners in our March survey support) and give small business owners and regular Americans a break on higher energy costs.
Taken together, these measures would reduce the pressure inflation is putting on the pocketbooks of small business owners and their workers. We recognize that many politicians don’t want to solve this problem because—with the midterm elections on the horizon—the economic struggles of working Americans can serve their political interests. But a better political strategy would be to adopt the measures above, which are broadly popular.
To maximize our economic recovery, we must seize opportunities to enact policies that help our small business community, which creates two-thirds of all new jobs and employs half of all workers, succeed. With the proper policies in place, America’s small businesses will flourish and lead our economy to prosperity.
Anne Zimmerman is the co-chair of Small Business for America’s Future and the founder and owner of Zimmerman & Co CPAs, a public accounting firm with offices in Cincinnati and Cleveland, Ohio.
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