Lawmakers passed up a golden opportunity recently to shake the recession's effects and put American small businesses back on the hiring track. Congress has a lot more work to do this summer if they plan to support entrepreneurship. Small businesses across the nation are poised for growth, and now is the time to facilitate their expansion by passing smart jobs legislation and helping them access capital.
Unfortunately, legislators failed on the first of these counts Tuesday when lawmakers in the Senate blocked the Small Business Jobs and Tax Relief Act. The bill would have done two things to help small businesses boost their bottom lines and hire.
First, it would have given them a 10 percent income tax credit on increased payroll in 2012. This credit was intended to encourage small business owners to hire or boost employee wages right now, and to reward them for doing so. The nonpartisan Congressional Budget Office said that compared to other proposals for incentivizing small business job creation, proposals like this one would have the greatest value per dollar of output. This tax credit could've had immediate benefits not only for our overall economy but also for communities everywhere that are struggling to enhance local economic growth through increased employment.
Another way the bill could have boosted small firms' bottom lines was by extending the 100 percent deduction for equipment purchases. That would've lowered entrepreneurs' after-tax costs, prompting them to make new investments and accelerate our overall economic recovery. This type of deduction is widely known to enjoy bipartisan support.
But small business owners won't see these benefits. Too many lawmakers are spending more time playing politics than working to pass smart legislation to help small business owners who have been bearing the brunt of the recession for quite some time. Now that the Small Business Jobs and Tax Relief Act is off the table, Congress must get its act together and start putting policy before politics if they want small businesses to help fix our country's employment problem.
Legislation aimed at helping small businesses access credit so they can grow and hire would be an excellent place to start -- we know this because entrepreneurs have told us so. An overwhelming 90 percent of small employers believe credit availability is a problem for small businesses, according to opinion polling we released earlier this year. Small employers also agree that when it comes to lending, banks are less friendly than they were four years ago: 61 percent say it is harder to get a loan now than it was then.
These entrepreneurs aren't imagining things. Banks' loan portfolios have been reduced by more than $47 billion since the pre-recession peak, and that affects small businesses from coast to coast. Lending has all but dried up for them, which is why, by more than a 2:1 ratio, small employers support increasing credit unions' lending cap from 12.25 percent to 27.5 percent of their assets. This is exactly what the Small Business Lending Enhancement Act -- a bill that's been floating around Congress for months -- would do. It's time to act on it.
Today's credit barrier limits small business expansion and strains entrepreneurs' capacity to put America back to work. Whether legislators choose to focus on bettering the lending landscape for them or giving them incentives to hire, the bottom line is small business owners need increased cash flow to keep their doors open and help grow the economy. As lawmakers in Congress continue using partisan rhetoric to dismantle strong proposals that could have created jobs, entrepreneurs are repeatedly voicing their support for the exact policies being axed or stalled in Congress. For their sake, legislators need to focus on repairing our jobs problem and bettering credit conditions now.