Did you hear? The IRS targeted conservative groups that were seeking tax exempt status? Oh, puh-lease. If you're running a small business then you're used to the government being involved in your life. This is really nothing new at all.
IRS shenanigans aside, there are plenty of things being done right now in D.C. that will likely affect your business and mine over the next few years. And the smart business owners I know are keeping a close eye on these activities by our elected officials. Here are just a few things to be watching.
1. Online sales tax. Just the other week the Senate passed the Marketplace Fairness Act and now the bill heads to the House where it's in for a much tougher fight. This means that if you like to sell your products online, as millions of small businesses do, then you're in for a shock. And I'm not talking about Internet porn either. The Marketplace Fairness Act, in its current form, will require you to take responsibility for collecting sales tax from each of your customers and remitting that tax to the appropriate jurisdiction -- from which I'm told there are thousands around the country. Don't you hate getting that nasty letter from some township in Michigan because you once sold a ten dollar accessory to someone who lived there and now that customer's local board is demanding the tax owed them? If this law passes, get ready for a lot more of that!
2. The Affordable Care Act. Otherwise known as health care reform or, if you're an opponent of the president and have absolutely no creativity: Obamacare. Health care reform was reality back in 2010 when the legislation initially passed, but it really kicks into gear later this year when the health care exchanges, the place where individuals (and in a couple of years small businesses) will buy their health care insurance, are scheduled to go live. And on January 1, 2014 the mandate becomes law which will require us all to have health insurance or (if we have more than 50 full time equivalent employees) provide health insurance for our full time employees or face penalties. Even if you're a small business with less than 50 full time equivalent people you'll still be subject to new reporting requirements and will have to figure out the exchanges. No one knows if this will control or explode health care costs.However, I do know that it's giving a lot of business people angina.
3. Competing Budgets. Do you prefer Senator Murray's budget proposal that cuts spending by $837 billion over 10 years but also asks for $923 billion in tax revenue or the president's plan which cuts spending by $1.2 trillion over the same period but only asks for $583 billion in new taxes? Or maybe you're into something more draconian, like Rep. Ryan's plan which proposes no tax increases but $5.7 trillion in spending cuts over the next decade. Decisions, decisions. Will the parties work things out and actually pass a federal budget for the first time in over five years? Or will Paul Ryan just go back to working out (he's pretty ripped). If they do, it could have a significant impact on the tax dollars we pay, the markets we serve and how the government spends money. Then again, nothing may happen until the next debt ceiling battle, now scheduled for October, where we may face a potential government shutdown and more sequestration. Deficits may be decreasing in the short term, but our national debt continues to go up and our leaders in Washington are very much engaged in a budget battle that will affect us all.
4. Tax reform. This seems like a long shot, but politicians from both parties are quite interested in doing something about our complicated and broken tax system. In fact, both the Chairmen of Congress's tax-writing committees (Democrat Max Baucus in the Senate and Republican Dave Camp in the House) have actually launched a joint website that they hope will boost public support for tax reform and as every small business owner knows launching a website means you're damn serious. Tax reform may include higher rates for some businesses and owners, less credits for others and greater limits on deductions for some. Hundreds of special exemptions, deductions and favors for certain industries may be taken off the books. Long time but fluctuating rules like the Section 179 deduction where small companies can write off up to $500,000 of their capital purchases in a year instead of depreciating them, may actually become permanent.
5. The Federal Reserve. So far, so good.The Fed has rescued us from a huge financial downturn a few years ago but they had to do it by providing a ton of liquidity through several quantitative easing programs. And now that the economy has recovered and is (slowly, very slowly) growing its way back to normalcy, the leaders at the Fed are putting together their plan to bring their balance sheet of reserves (recently reported at a staggeringly high $3.2 trillion as compared to $870 billion back before the financial crisis) down to a more manageable level. The challenges: doing so without tanking the stock market, creating a spike in inflation, excessively raising interest rates or bringing the Who out of retirement for one more world tour. And I thought raising three teenage kids was hard. If mistakes are made then our businesses may be forced to deal with rising interest and inflation costs, decreasing demand, market uncertainty, and a visit to the high school principal's office. The risks are high. The margin for error is narrow. And business owners are silently praying: go Ben, go!
6. Immigration reform. A bipartisan group in the Senate has crafted a new immigration reform bill that would put undocumented immigrants on a 13-year path to citizenship. Meanwhile, the House has a group of smaller bills that address guest workers and immigrant status. It's possible that we could have a law that the president could sign before the end of next year. This law could hugely impact your small business. You may have the ability to permanently hire people with special skills because they're allowed to remain in the country rather than going home to China or the Middle East. Your costs of labor may go down. Or then again they may go up if you've been employing undocumented immigrants who now want their fair share of benefits (oh, and don't even try and tell me this doesn't happen, Mr. Landscaper OK?).
7. Crowdfunding. Crowdfunding is where you can raise money from the public for doing stupid things like selling lemonade out of a WW2 Sherman tank or firing a cheesecake into space (both ideas are sadly true) or really cool things like funding the development of a new 3-D printer or financing a great film project. Once this wonderful form of social media financing started taking off, of course the government needed to get involved and so in March 2012 legislation was passed (the Jumpstart Our Business Startups Act) which will enable small businesses to use the Internet to raise up to $1 million in small investments from lots of people (this, of course, assumes that your IT guy shows up and fixes your router so you can get online). But the hitch is that the rules were kicked over to the Securities and Exchange Commission for finalization. And then the SEC changed leadership. So there it sits. What will the rules ultimately be? When will they become live? No one knows yet, but rest assured when the SEC finally acts there will be tons of money out there available to finance the many dreams, both excellent and ridiculous, of small business owners and entrepreneurs.
So stop worrying about that silly old "IRS-targeting-political-groups thing." We're small business people. We're used to the government being involved in our lives!
A previous version of this article appeared in Inc.com
Follow Gene Marks on Twitter: www.twitter.com/genemarks