Small businesses understand competitive realities, role of government

There are lessons in the nationwide survey: Folks in small business understand that not all business tax breaks treat businesses equitably, or help the economy.

Mike Owen
Mike Owen

Political talk pandering to small businesses is commonplace, and often involves inaccurate assumptions about positions on taxes and the role of government. Thus, they are not only frequent, but frequently wrong.

A survey released today by the Small Business Majority (SBM) — a nonpartisan small-business advocacy group — found wide acknowledgement of the need for more equitable, sustainable fiscal choices in Washington. As noted by SBM:

Contrary to popular belief, nationwide scientific opinion polling conducted earlier this month found that the majority of small business owners—more of whom identify as Republican than Democrat (47%-35%)—believe that raising taxes on the wealthiest 2% is the right thing to do in light of our budget crisis. What’s more, 40% strongly believe this.

The polling also found the majority of entrepreneurs see a productive role for government in helping small businesses achieve success. Nearly 6 in 10 agree government can play an effective role in helping small businesses thrive.

These are interesting results but they should not be terribly surprising.

Folks in small business know:

  • Budgets have two sides — spending and revenue.
  • Small businesses benefit when employees and consumers are educated, safe, healthy and financially secure.
  • Small businesses can compete when the playing field is level for all businesses; it’s hard to compete with bigger competitors who are getting special breaks from the referee — government.

And there are lessons in this for state policy makers as well.

Tax breaks geared to multistate corporate giants that can shift profits to other nations or states do not benefit small businesses, or all businesses equitably, and do not always help the economy. It is clear that people running small businesses understand this.

Iowa can make the playing field better, and restore squandered revenue, by plugging tax loopholes that are costing the state $60 million to $100 million a year. Several states already do this, including four of the six states that border Iowa: Illinois (home of Deere & Co.), Wisconsin, Minnesota and Nebraska. But Iowa lawmakers have refused to defy the big corporate lobbyists that have stood in the way of this important reform, known as “combined reporting.”

You can learn more about that and other inequitable, unaccountable tax breaks in Iowa at the Iowa Fiscal Partnership website,

Posted by Mike Owen, Assistant Director

Focus on Facts: Reform Lowers Rates

There’s a lot of confusion being promoted by some about the tax-reform plan before the Iowa Legislature.

There are three main points to it:

  • • It lowers Iowa’s tax rates, taking the top rate down by 2 percentage points.
  • • To enable the lower rates, it does away with federal deductibility.
  • • There are additional boosts in tax credits targeted to low- and moderate-income working families.

Iowa Fiscal Partnership analysts have — like others — been going through the figures provided by the nonpartisan Legislative Services Agency (LSA) about the effects of the total package. Those effects have been portrayed many ways. IFP considers the following to be the most important points to be understood from that LSA analysis:

  • • For both 2009 and 2010, 73 percent of households with incomes below $50,000 a year would see their taxes either stay the same or decrease under the reform proposal.
  • • During 2009, households earning below $50,000 would, on average, see a tax change of no more than $70 in either direction, as a cut or an increase.
  • • Overall, Iowans earning below $125,000 would, on average, see a tax cut or no change.

That last number is an important one. We’ve been hearing a lot in recent days about effects on small business. Many of the claims don’t hold water.

As our researchers have found, more than 70 percent of small business owners in the U.S. earn less than $125,000. Because many small-business owners report and pay their state income tax on individual returns, this plan obviously helps them, too.

This plan makes a small but positive change in the tax code.

Posted by David Osterberg, Executive Director