Tuesday 8 January 2013

Small business owners “nervous” about looming fiscal cliff


Eric Blinderman, who had to shut down his two upscale New York restaurants for a week in the aftermath of Hurricane Sandy, said the approaching fiscal cliff could mean a “double whammy” for his business heading into the busy holiday season.

With a package of $500 billion in tax increases and spending cuts set to come into effect on January 1 if President Obama and Congress fail to agree on an extension or reach an alternate deal, small business owners like Blinderman will be hit with additional costs that could seriously impact their bottom line and ability to grow.
“That uncertainty is what leaves me so nervous,” said Blinderman, who operates two restaurants, both named Mas, in Manhattan’s affluent West Village that employ about 100 people.
Blinderman relied on a pair of Small Business Administration (SBA) loans to open his restaurants and wants to launch a third location, but said some of the projected cuts to the SBA’s budget may derail that.
“If we don’t sidestep the fiscal cliff then I won’t be able to expand,” he said, referring to the $65 billion in federal spending cuts that will be automatically triggered as a result of the Budget Control Act – a last-minute deficit-reduction deal reached by Obama and the Republican-led Congress in August 2011.
“All of these SBA lending programs and related issues will be impacted negatively,” said Blinderman, adding: “if this had occurred in 2010 or 2004 I wouldn’t be a small business owner and neither of my restaurants would exist.”
Blinderman’s concerns are supported by the findings from a new national poll released this week by the Small Business Majority, a Washington, D.C.-based small business advocacy group. The telephone poll of 500 small business owners, conducted over a two-week period from September 27 to October 12, showed more than 60 percent of respondents are anxious about the potential impact of spending cuts on the SBA, military, infrastructure and government contractors.
“The vast majority of small business owners are familiar with the basic situation,” said SBM founder and CEO John Arrensmeyer. “The concern is how much of this is going to affect small businesses and job creation.”
Small business owners are most worried about the impact of tax increases on their employees and customers. A 2-percent payroll tax cut Obama negotiated with Congress in 2010 when the Bush-era tax cuts were extended is due to expire, ending what amounts to a $1,000 income boost to many middle class taxpayers.
Also beginning in 2013, 28 million Americans could be subjected to the alternative minimum tax (AMT), a levy initially created in 1969 as a “millionaire’s tax” but now would apply to people with incomes as low as $30,000.
The SMB poll showed 80 percent of small business owners are concerned about a potential increase in the number of households facing the AMT, which Arrensmeyer said would entail a loss of as much as $2,800 per household.
The survey also revealed 75 percent of respondents favored the elimination of tax loopholes that favor large corporations and nearly 60 percent supported raising capital gains tax to 20 percent for the wealthiest 2 percent, which includes people earning above $250,000 a year.
Arrensmeyer said that applied to less than 3 percent of the small business owners who participated in the poll, of which 47 percent identified themselves as Republicans, versus 35 percent Democrat, 8 percent independent and 10 percent who chose “other” or didn’t respond.
“My customers are squarely in the middle class,” said Mike Brey, owner of Fairfax, Virginia-based toy store chain Hobby Works. “We got crunched pretty hard during the recession. We don’t want to be looking at another ‘pothole’ here as we recover from what we just went through.”
Brey, who operates five stores in Virginia and Maryland that bring in about $5 million in annual revenues, is in the process of adding two more locations. He said political dithering over the deficit could derail his expansion plans as the amount of tax exemptions he can employ could be significantly reduced come January.
“It’s extraordinarily difficult when a major portion of your tax planning is up in the air,” confessed Brey, who added it impacts his ability to get bank loans. “If you’re expected to lose a significant portion of your ability to capitalize expenses in the first year, that definitely affects your projections and your planning for how you’re going to move forward.”
Most small business owners just want their political leaders to come to some sort of resolution. The SMB poll found 53 percent want Congress and the president to make job growth their top priority, as opposed to 42 percent who want them to focus on a plan to reduce the deficit.
Larry Lang, chief executive for Quorum, a Silicon Valley-based technology company that develops cloud-based software solutions for businesses, doesn’t anticipate there will be a resolution before the end-of-the-year deadline.
“Sadly politicians, like undisciplined school children, tend to leave their homework to the 11th hour,” said Lang, who nevertheless plans to grow Quorum’s 30-person staff by as much as “50 percent” in the next year.
“Sticking to our knitting, life goes on,” he added. “Small and medium-sized businesses need to do what they need to do.”
Article source :http://uk.reuters.com
Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us On Facebook

No comments:

Post a Comment