Control of Congress and ... Small Business

Washington, D.C. – Many of the pundits have predicted the Democrats will take control of the House on Nov. 7. Keep in mind this year has been full of bombshells, the bizarre and the unanticipated — perhaps election night will continue with surprises.

That being said, which party ultimately controls Congress will directly affect small business owners.

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If Democrats take control of the House, seemingly there will be very few surprises for entrepreneurs. Their party leaders have been explicit about their plans for the 110th Congress. Those who would lead key committees have dropped more than just hints about their plans and agenda.

On the issue of tax relief and efforts to extend or make permanent specific measures that benefit small business owners, the outlook looks pretty grim. Already, business owners are coping with uncertainty with regards to extending or making permanent section 179 expensing, personal income tax rates, capital gains tax rates, the death tax and other tax provisions.

While Rep. Charlie Rangel, D-N.Y., ranking member of the Ways and Means Committee, has sort of back-tracked on his statement that he could not “think of one” tax cut that he would extend if he took over as chairman, he now says it “doesn’t make sense” to talk about expiring taxes since they occur too far into the future.

Of course, most of the tax cuts expire in 2010 – only three years from when Rangel would take over as chair if Democrats win. For the entrepreneur diligently planning their business growth strategy, three years is just around the corner.

There is no doubt that there will be changes to tax policy if Democrats take control. Minority Leader Nancy Pelosi, D-Calif., is talking about a “roll back” on tax relief for the wealthy (read: small business owners). Democrat members of the Ways and Means Committee, where tax bills are written and advanced, do not have strong small business voting records. According to the Small Business & Entrepreneurship Council’s (SBE Council’s) congressional score card (note: the author’s organization), Democrats on the Ways and Means Committee average 22.4 percent in terms of their overall score on key small business votes.

On health care reform, the concept of small business pooling through association health plans (AHPs) may never see the light of day. While a good number of Democrats voted for AHP legislation when it moved through the House (and on multiple occasions), most of their colleagues supported a substitute that would allow small business owners to buy into a federal government employee type plan, but with certain conditions and mandates on their participation. Federal health plans are very expensive for the average small firm, and an additional $5 billion would be expended on such a government-centered “pooling” arrangement.

No matter which party controls Congress, efforts that make the U.S. more self-reliant for its energy needs will not begin to “pay-off” until the mid or long-term. Encouraging innovation and technological development is a sound and needed course of action, and both parties have supported such a strategy.

But are more taxes on energy companies really a solution? That is another key element of the Democrat’s 100-hour agenda. We all know that these costs will be passed down to consumers and small business owners in the form of higher prices. So much for more affordable energy.

A core plank of Pelosi’s 100-hour game plan if she were to become House Speaker includes raising the minimum wage to $7.25 an hour. Ideally, the Democrats would hike the minimum wage in one fell swoop — no phase-ins on a multi-year basis as proposed in various bipartisan bills.

It has been correctly argued that Congress’s record on advancing legislation important to small business has been rather lackluster. While the House has been extremely active in passing bills addressing the key priorities of entrepreneurs, most of the legislation has hit a brick wall over in the Senate.

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As a late September report by the Democrats points out, Republicans have done a poor job at getting their own small business bills through Congress even though they control both Houses and the White House.

The report found that of widely identified small business priorities turned into legislation, “175 of the 196 bills continue to languish in Congress. Forty-five percent of the bills examined were bipartisan, and 85 percent of the reviewed bills had Republican lead sponsors.”

Small business owners are disappointed by the Republican track record, particularly the lack of productivity in the Senate. Will Democrat control break the legislative logjam and get things moving? Perhaps, but quite possibly not in a direction preferred by the majority of entrepreneurs.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council, a research and advocacy group based in Washington, D.C. that works to protect small business and promote entrepreneurship. She is also founder of Women Entrepreneurs, Inc., an association helping women business owners succeed through education, networking and advocacy. Kerrigan can be reached at kkerrigan@sbecouncil.org.