Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, April 23, 1993 TAG: 9304230478
SECTION: EDITORIAL PAGE: A10 EDITION: METRO
SOURCE: BILL CORBITT JR.
DATELINE: LENGTH: Medium
In the 1982-89 economic expansion, small business accounted for more than 12 million new jobs. Firms with fewer than 20 employees created more than 6 million of those new jobs, or 51 percent.
The study said, "Federal government policies since 1989 amount to nothing less than economic crib death, suffocating jobs in the cradle of small business."
It goes on to state that the government burden per worker increased 34.4 percent between 1989 and 1992. The typical small business saw a precipitous drop in average profits per worker during that period. This corresponds with the increase in government burden of about $130 billion in costs beyond those of 1990.
Small businesses like Blue Stone Block have been hammered by regulations at a time when job creation is of primary concern to average Americans. In addition to these regulations, there has been nearly an 8 percent increase in the burden of indirect business taxes, such as sales and excise taxes, from 1989-1992.
Little was written that the average reader would remember about the Fair Labor Standards Act of 1989, the Americans With Disabilities Act of 1990, the Clean Air Act amendments of 1990, the Civil Rights Act of 1991 or the Family and Medical Leave Act of 1992. These have the effect of being a hidden tax, not only on businesses affected but on the goods and services those businesses provide. The purpose of this legislation was honorable, but the mistake was assuming that it would have little or no impact on the ability of a small business to create jobs. Many of those who, in theory, were to have benefited from this legislation now find themselves among the unemployed, perhaps permanently.
According to this study, in 1982 the average pretax profits of a typical small business averaged about $1,600 per worker; by 1987, it had risen to about $3,600. There was a slight drop in 1988 to $3,500 per worker; from 1989 to 1992, it dropped to a 10-year low of about $750. What effect might this have on a small family business that employs 20 people? If that business were typical, it would have seen annual pretax profits rise from $32,000 in 1982 to $72,000 in 1988 and plummet to $15,000 last year. These profits buy equipment, replace trucks, build new warehouses, and pay for hiring and training new employees.
In the late '80s, those declining profits met with higher taxes as the result of the 1986 tax changes, higher medical-insurance costs for employees, higher vehicle-insurance costs, higher workers-compensation costs and higher costs to comply with mandated, but sometimes poorly defined, safety regulations.
You say, "What's the big deal? These increases are just passed on to purchasers in the form of higher prices." In a good economy, that was the case. The economy of the past several years has not allowed raising prices to cover regulatory-cost increases.
The small-business community has no vote in Washington. "Don't forget all those lobbyists that throw tons of money at our Congress each year," you could say. In the real world, no business with 20 or fewer employees has a lobbyist. Look to big business if you want pockets deep enough to fund lobbyists.
The past two Congresses have enacted numerous burdensome new regulations that have the effect of killing small business's job creation. In addition, Congress has failed to control the burgeoning federal budget deficit, even while raising the taxes businesses have to pay. State and local governments have steadily increased the tax and regulatory burden on their business residents. These federal burdens grew rapidly, even as a Republican president and gridlock failed to exercise constraint over a Democratic Congress. Now that we have a Democratic president, watch how fast taxes, spending and regulations grow. We might as well get used to 7 percent unemployment. Those of us in small business spend most of our waking hours worrying about how we can continue to keep our employees working and our doors open.
Pat that small-business person on the back who repairs your auto, sells you groceries or grows your food. We are so used to getting kicked in the keester that a pat on the back will be remembered for months to come.
\ AUTHOR Bill Corbitt Jr. is chairman of Blue Stone Block, Inc. in Roanoke.
by CNB