Let's make the American dream of starting a business a reality
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News reports have focused on acrimonious moments from the confirmation hearings of President TrumpDonald John TrumpBiden team wants to understand Trump effort to 'hollow out government agencies' Trump's remaking of the judicial system Overnight Defense: Trump transgender ban 'inflicts concrete harms,' study says | China objects to US admiral's Taiwan visit MORE’s cabinet nominees, but it was a different scene at the Jan. 24 confirmation hearing of Linda McMahonLinda Marie McMahonApril's dumbest and most dangerous coronavirus declarations Trump convenes sports commissioners in hopes of filling stadiums Senate confirms Trump pick for small business chief MORE, who has been nominated to lead the Small Business Administration (SBA).

It was a very positive hearing, and hopefully the bipartisan warmth lasts well into McMahon’s tenure, once confirmed, because there’s a lot to be done to reignite entrepreneurship in America.

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No one disputes that new business creation in the United States. has taken a big hit. It started well before the Great Recession and tumbled during that hard economic period. Unfortunately, entrepreneurship has never fully recovered.

 

From 2009 to 2011, there were more business closures than startups, according to the SBA Office of Advocacy. This startling trend has slightly reversed course, but the economy does not have near the volume of entrepreneurial activity and business entities (as a share of the relevant population) that existed prior to the Great Recession.

According to an analysis published by the Small Business & Entrepreneurship Council’s chief economist Raymond Keating, the significant decline in new business creation during the last decade has been felt across the board, among unincorporated and incorporated, self-employed, startups and employer firms.

Keating’s “gap” analysis finds an estimated shortfall of anywhere from 867,000 to 4.8 million businesses over the past decade, with “3.7 million missing businesses being quite reasonable based on a combination of the most often cited self-employed and employer firms data.” That’s shocking.

In her statement before the Senate Committee on Small Business and Entrepreneurship, McMahon said, “Should I have the honor of being confirmed to lead the SBA, I will work to revitalize the spirit of entrepreneurship in America.”

Having scaled World Wrestling Entertainment from a small and scrappy business into a major, publicly held global brand, McMahon’s know-how and startup grit will be a major asset for inspiring and leading others toward entrepreneurship. Her platform and access to the president will also provide McMahon the opportunity to make a mark by advocating for reforms that remove startup barriers.

President Trump and the Republican majority in Congress have gotten the ball rolling on some of the major issues. Excessive red tape, a complex and burdensome tax system, high health costs, and access to capital are in that mix. As we work on these issues with a focus on doing big changes, there are key reforms that need to be worked into the legislative agenda to begin to spur an entrepreneurial revival.

Improve equity and debt-based crowdfunding

It took four long years for the Securities and Exchange Commission (SEC) to release the final set of rules for Title III of the bipartisan JOBS Act, which was geared to address the dearth in capital for startups and small businesses. Some SEC actions have undermined the intent of the Act, and this needs to be fixed.

Changes proposed in Rep. Patrick McHenryPatrick Timothy McHenryMaxine Waters says Biden win is 'dawn of a new progressive America' McCarthy: 'I would think I already have the votes' to remain as House GOP leader Ex-RNC, Trump fundraiser Elliott Broidy charged in covert lobbying scheme MORE’s (R-N.C.) Fix Crowdfunding Act in the 114th Congress would increase the amount of capital that can be raised from $1 million to $5 million, cut red tape and compliance costs, clarify funding portal liability, allow issuers to “test the waters,” and permit special purpose entities to engage in Title III offerings.

Title III crowdfunding is showing great promise. It is being used by entrepreneurs who previously lacked access to closed financing networks, and in areas of the country where new businesses are needed. Improvements through legislation that fix SEC overreach and build upon its early success will enable more entrepreneurs to utilize this funding option.

Modernize outdated corporate tax provisions

When I talk to people who help teenagers and young entrepreneurs start businesses, they continually report that these risk-takers are totally turned off by a complex tax code that immediately eats their profits.

Self-employment taxes kick in at $400, which is 15.3 percent of profits. The $400 threshold has not been changed since the 1950s, yet the standard deduction on federal income tax is adjusted annually. If the self-employment tax floor had been adjusted at the same rate as the standard deduction, it would be more than $6,000. It makes sense to update it. Other pieces of the tax code are prime for updating and these should not be overlooked in tax reform.

Reduce local barriers through national leadership

Red tape at the local level is often the killjoy that deflates an excited entrepreneur. Licensing, registration, permits, fees, zoning...the list goes on. Many localities and states are working hard to reform laws to improve the business environment and make the startup process easier. Washington needs to strongly support and find innovative ways to reward these efforts. Accelerating the pace of reform across the country, especially in urban areas, will ensure entrepreneurial opportunity is available to everyone.

Stronger business creation in America is key to sustainable job growth. Restoring healthy levels of entrepreneurs will require collaboration across government—including education—to identify policy changes and innovative solutions that help make the dream of starting a business a reality for many more Americans.

Karen Kerrigan is president and chief executive officer of the Small Business & Entrepreneurship Council. Follow her @KarenKerrigan.


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