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Small businesses already slipping off the 'cliff'

Published on NewsOK Modified: December 12, 2012 at 3:48 pm •  Published: December 12, 2012
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"Let's say I'm going to have to pay $30,000 more for next year in terms of taxes than I did this year," Cooper says. "What impacts me personally impacts my business."

Cooper expects Congress to do what it has done many times in the past — come up with a stopgap measure and defer significant decisions until six months or more into the future. That would keep him in limbo while he waits to see if lawmakers will eventually agree on taxes and a budget. He's angry about what's happening in Washington.

"It's an embarrassment to the country. It's an insult to my intelligence," he says.

During the presidential campaign, Republican candidate Mitt Romney contended that small business owners would be hit so hard by the scheduled increase in the top tax rate — a jump from 35 percent to 39.6 percent — that they'd stop creating jobs. That rate would affect single taxpayers who earn $200,000 or more and households that earn $250,000 or more. But Democrats and advocacy groups including Small Business Majority say the number of business owners who would be affected by that increase is less than 5 percent.

"This is a myth that just continues to get life without any substantiation," says Rep. Gwen Moore, D-Wis. She says the bigger issues are the 2 percent payroll tax cut and unemployment insurance extension. If they're allowed to die, she says, businesses like Jones' Five Guys franchises will suffer.

"That's the bottom line — how many people are going to be out eating those burgers and fries," she says.

Edna Abernathy, who owns two businesses in Moore's district in Waukesha, is also concerned about the payroll tax cut because of the impact it will have on her staff. If it disappears, workers will end up paying as much as extra $2,000 to the government, essentially giving them a pay cut. Abernathy says she will try to replace the lost money for her employees at E.R. Abernathy Industrial Inc., which sells janitorial, safety and other supplies to other businesses, and Abernathy Consulting Ltd., an information technology consulting firm.

"We're going to have to try to make it up with more business, and we are looking at that as we prepare for the new year in terms of marketing strategies — how can we go after more market share?" she says.

She's looking toward 2013 with some trepidation, because she says many of her clients, which include companies in the Fortune 500, have been cutting back. "It's disheartening. Normally we look at the new year with a lot of enthusiasm," Abernathy says.

Small business owners who rely on federal contracts are worried about how much business they'll get from the government if big spending cuts go into effect. Vince Fudzie, CEO of Triune, a general contracting company based in Dallas, says business with the government has been shrinking since 2006, and the cliff presents yet another challenge. He's already been waiting to find out if he'll get approval to finish a dormitory project for the Department of Labor that's 95 percent complete.

If no agreement is struck, Fudzie says he'll have to re-evaluate his business and see if it can find new niches to fill.

"Even in a bad economy, there are pockets that are doing better. We have to figure out, what are we good at?" he says.

In the meantime, he's frustrated by lawmakers' inability to reach a deal.

"We elect these seemingly reasonable people to go to Congress and they seem unwilling to get along," he says.