Editorial

Testimony shows chilling impact on startups, entrepreneurs

March 6, 2015
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Congress has been raising “flags up the pole” in regard to changes in tax code for businesses, and although it seems unlikely this Congress will act on any issue, Grand Rapids Business Journal lends its support to the efforts of a local small business owner “invited” to testify to the House of Representatives Small Business Subcommittee on a sustained lack of job creation, cyber security regulations and taxation.

The most chilling testimony, however, was provided by Cynthia Kay, president of CK & Co., a full-service media production and corporate communications consulting company in Grand Rapids: The impact of tax codes, additional regulation and lack of access to capital has resulted in a “net death” rate of small businesses.

Kay, citing Gallup study results, told the representatives: “The rate of new firm births is being outpaced by firm deaths. Specifically, according to Gallup, 400,000 new businesses are being born annually nationwide, while 470,000 per year are dying.”

She also noted that any gains briefly made during the economic recovery “suddenly turned upside down” in the past six years. The National Small Business Association, which Kay serves as a vice chair, reports small employers are 99.7 percent of all employer firms in the U.S.

Kay’s list of inhibitors and the impact on entrepreneurs and small businesses reads like a death sentence for entrepreneurs, which underscores the necessity for action on reforms.

“I have to believe,” she testified, “that a good portion of (the failures are) due to the growing set of hurdles over which would-be entrepreneurs must jump: the inability to garner financing; the vast web of local, state and federal regulatory requirements; the massive local, state and federal tax burden; the growing cost of health care and new requirements on employers which are riddled with errors; the threat of lawsuit and liability in any number of areas, both from the government and private citizens; the high cost of protecting your intellectual property — and the list goes on …”

Undoubtedly the most significant act by U.S. legislators would be tax code reforms that would free small businesses to more adequately fund against cyber security and intellectual property theft, which as Kay noted, is an issue of particular vulnerability to small businesses, more than 50 percent of which have been assailed by hackers trying to gain access to their bank accounts.

The Business Journal supports Kay’s testimony for broad tax reform.

“In recent years, Congress has enacted dozens of important tax provisions for small businesses to encourage job creation, investment, research and international competitiveness. However, due to budgetary and political restraints, too many of these provisions were enacted on a temporary basis, requiring repeated extensions and creating layers upon layers of complexity and instability, rendering any kind of reasonable tax planning nearly impossible for small business.

“Now, however, these provisions have been expired since the end of last year, and by Congress continuing to further delay their extensions, it punishes our work, investment, risk-taking and entrepreneurship.”

Well done, Cynthia Kay.

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