Pocketbook issues

The 2000 election brings some of small business's biggest issues to the forefront--from affordable health care to dotcom taxes

May 1, 2000
Web posted at: 6:58 p.m. EDT (2258 GMT)

For the first time in years, the nation's 25 million small-business owners feel they have a stake in the outcome next November. It doesn't happen often, but this presidential-election year features a raft of issues affecting their pocketbooks. Some, like the minimum wage, are perennials; others, like Internet taxes, are brand new. All, however, pose dramatic changes in the way small companies do business, take care of their employees and pay Uncle Sam. Here's a sampling of the leading issues Washington hands are wrangling over:

Hiking the minimum wage

A higher minimum wage is so popular with voters that in March, 78 Republicans in the House of Representatives joined their Democratic colleagues to approve a $1 hike, which would raise the base wage to $6.15 an hour. House G.O.P. leaders have tied the raise to their $123 billion tax-cut package, which President Clinton has vowed to veto. But both parties are so eager to score election-year points that a compromise is highly probable.

What do corporate small fry think of this? "It can really hurt cash-strapped concerns struggling to maintain their profit margins," says John Emling, a lobbyist for the National Federation of Independent Business (nfib) in Washington. "But if we have to swallow this bitter pill, we want some sugar coating (such as the proposed tax cut) to help it go down easier."

Democrats: Yea Republicans: Yea

Rolling back the death tax

This 84-year-old tax requires estates to pay an assessment of 37% to 55% on the value of assets greater than $675,000 after the estate holder's demise. Family businesses decry the tax as an abusive penalty, because kids are suddenly hit with crippling bills that often force them to sell off Mom's or Dad's legacy. Supporters? They say the tax helps close the gap between rich and poor. The G.O.P. is mounting a three-pronged attack on the tax. The House tax-cut bill passed last July would slash the estate tax's floor rate to 18% and the ceiling to 50%. Republican Representative Jennifer Dunn of Washington is backing that up with a separate bill that would ease the tax 5% a year until it reaches zero by 2010. And G.O.P. Governor George W. Bush of Texas has vowed to kill the tax outright if elected President. Many Democrats agree with Vice President Al Gore that a repeal would be a sop to the rich. But others believe the benefits for small companies outweigh that concern. Democratic Representative John Tanner of Tennessee, for one, is co-sponsoring Dunn's bill, and there seem to be enough like-minded Democrats to fashion a compromise on the issue.

Democrats: Nay Republicans: Yea

Lowering health-care costs

This is the No. 1 concern of small-business owners. According to the NFIB, 60% of the 44.3 million Americans without health insurance are entrepreneurs, their families and employees. One reason is the high cost of state-mandated insurance plans, which can require small firms to buy broad insurance policies with pricey offerings most entrepreneurs cannot afford. To help alleviate the problem, many small firms want to band together to form association health plans with national bargaining power. A bill proposed by Republican Representative James Talent of Missouri would allow this and make small business exempt from mandates too. But AHPs have strong opposition from large insurers and Democrats, including Gore, who do not favor private-sector solutions for health-care problems. Republicans, though, see AHPs as a potent plank in their election-year health-care platform. Indeed, in his $42 billion health-care reform plan, the "New Prosperity Initiative" unveiled in April, Bush proposed that AHPs be offered to small-business owners through trade associations.

Democrats: Nay Republicans: Yea

Taxing the Internet

On one side are state officials, who fear that tax-free e-commerce will erode sales-tax receipts. On the other side are dotcoms and antitax partisans, who argue that a sales tax would stifle e-commerce. The issue poses a dilemma for small businesses: though reflexively antitax, many believe dotcoms are reaping an unfair price advantage from the tax-free Web. Both Gore and Bush favor extending the moratorium but stop there. How tough is this issue? A blue-ribbon panel at press time voted 10-8 not to tax the Internet. Their recommendation has been sent to Congress for review. Whether the massacre on NASDAQ in mid-April will ameliorate concern about this issue on Capitol Hill remains to be seen. But experts such as Christopher Wysocki, president of the Small Business Survival Committee, a lobbying group in Washington, believe taxing e-commerce would put the entire Internet sector into a tailspin. Says Wysocki: "It would change the rules of the game for dotcom entrepreneurs, who would find it nearly impossible to collect and distribute sales tax for the 7,500 state and local taxing jursidictions across America. To survive, many would probably move their businesses offshore. That could really jeopardize the long-term health of the digital economy."

Democrats: Abstain Republicans: Abstain

This piece was written in coordination with FSB (FORTUNE Small Business) magazine