This week, a Reuters article discussed a study by the National Federation of Independent Business that indicated small business optimism increased during the month of July. While this is undoubtedly good news, a closer look at the survey shows that while small business owners’ confidence may be edging up slightly, there are still significant concerns about the direction of the economy.
For example, just nine percent of employers surveyed have plans to hire more employees and think it is a good time to expand their business. While these metrics improved two percent over the previous month, neither can be construed as “good.” Even more concerning, the percent of small business owners expecting business conditions to improve over the next six months decreased by two percent.
That small businesses are concerned about the future and leery of investing to grow their business should not come as much of a surprise. A study released by the U.S. Chamber of Commerce last month revealed that the Patient Protection and Affordable Care Act (PPACA) was the top concern among small business owners, with 79 percent of them thinking PPACA would make health care more expensive. It is easy to see why: The HIT likely to increase health insurance costs for the average family by $500 per year.
The HIT is yet another factor that makes the cost of doing business increase for small businesses that are already taxed heavily. According to a study out last week, companies organized as S-Corps, or partnerships, face significantly higher tax burdens than corporations. The HIT only makes this situation worse and diverts funds that could be used to pay for business expansion or hiring new employees and directs it toward an unpopular government program.
Something needs to be done to help small businesses from feeling the brunt of the HIT. Ironically, the uncertainty felt by many about what will happen as a result of the PPACA has carried over to the actual implementation of the law itself. While the Obama administration has extended numerous exemptions and delays to PPACA’s mandates, some provisions, including the HIT has been ignored to this point. One thing is certain, however: As long as small businesses are still uncertain about the direction of the economy, we will still face stunted growth and unacceptably-high unemployment.