Obama's Impact on Small Business

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Our surveys show that 88% of small business owners hire someone on the outside to do their taxes for them. We think that trying to find ways to simplify the filing process can have a benefit for small business owners. A lot of these targeted tax incentives are interesting proposals, but they also increase the complexity of the tax code and make it more expensive for small business owners. A simpler, more straightforward tax code might be as effective in reducing costs as a lot of targeted provisions would be.

Senator Obama got a lot of support during the campaign from labor unions. How would you characterize candidate Obama's outlook on labor issues?

Jay Sumner: We expect that the Obama Administration will focus on the protection of the worker. Their primary initial priority may be an attempt to make it easier for workers to unionize. The Employee Free Choice Act was introduced in the last Congress, and we anticipate that it will be reintroduced in the next, with a good chance that it will be passed in some form.

Many smaller companies don't have unionized workers. How would the proposed legislation—if it gets reintroduced and passes—affect small business owners?

Sumner: It could get easier for labor unions to go after small businesses, because it will be cheaper for them to unionize, since they wouldn't have to hold a secret ballot election. We anticipate that small companies will have a much greater likelihood of being unionized. The impact of being unionized is greater on small companies because of the overhead costs of managing a unionized workforce. Even if the union does not negotiate higher salaries and benefits, the employer still incurs the costs of negotiating and administering the union contract.

What other labor policy changes would you predict are likely to occur?

Sumner: There may be efforts to expand the coverage of the Family Medical Leave Act to smaller employers and have the leave paid through an employer payroll tax. Right now, the FMLA covers firms with 50 or more employees. That could be reduced to cover companies with 25 employees. Other changes might address paying for leave, making paid sick leave mandatory, and requiring employers to attempt to accommodate flexible work arrangements for employees.

What kind of timeline do you think might be attached to some of these ideas, if they are indeed proposed?

Sumner: All of the labor and employment initiatives that the Obama campaign talked about were introduced in the 110th Congress, and he was a sponsor. So all of these proposals have been introduced and voted on at least once. That makes it easier to get passage quickly.

The cost of offering quality health care is consistently cited as one of the top concerns for small business owners. How will the Obama Administration address those concerns?

John Arensmeyer: He has a number of health-care proposals for small business that we generally support. For instance, a bill was introduced in the last Senate that allows smaller companies to form health-care pools and reduce the cost of their coverage. There's also a proposal to increase coverage for children under SCHIP [State Children's Health Insurance Program] that passed Congress, but Bush vetoed it. I think there's no doubt that will have enough support to pass under Obama, and it could help small companies, because 37% of all SCHIP-eligible children have parents who work in small businesses.

Some surveys have shown small employers are wary about health-care reform. Is getting comprehensive reform through really possible?

Arensmeyer: Having small business owners worry about something like health care—which has nothing to do with running their core business or improving the quality of their product—is a huge impediment to companies starting up and growing. For us to really innovate and solve economic problems, health care is a critical piece. At the end of the day, most recessions have been overcome by small businesses starting to create new jobs, and if we want to have that happen again, health-care reform is essential.

What timeline do you anticipate on the process?

Arensmeyer: I'd say the chances are very high that the issue will be addressed during Obama's first term. Whether it will be taken up during '09, I'd say there's maybe a little more than a 50-50 chance. There may be a lot of incremental steps taken, and I think it will be tempting to get a victory on the children's health-care funding increase quickly. But we'd like to see comprehensive reform addressed as quickly as possible, because we believe that's really crucial for small business.

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.