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North Carolina Business Event 9/23/92 [OA 7581] [1]
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26
23
1
3
THE WHITE HOUSE
Office of the Press Secretary
(Greensboro, North Carolina)
For Immediate Release
September 23, 1992
REMARKS BY THE PRESIDENT
TO TRIAD BUSINESS COMMUNITY
Joseph S. Koury Convention Center
Greensboro, North Carolina
9:50 A.M. EDT
THE PRESIDENT: Thank you, Tom. Thank you very, very
much, and what a wonderful welcome back to this state. Thank you
all, please be seated. It's an honor to be introduced by a
successful, honored, small businessman, Tom Coble. Thank you, sir,
for those kind words. I also want to salute the woman who's done so
much to advance the interests of American small businesses, our
Administrator of the Small Business Administration, Pat Saiki, former
member of Congress and now of our SBA in Washington. (Applause.)
And also to, of course, to salute the inimitable, marvelous Governor
of this state, Jim Martin. what a job he's done for the country and
for North Carolina. (Applause.) And salute, too, congressional
candidates Barbara Gore Washington of the 12th District and Richard
Burr of the 5th District. I'm glad to be with them. (Applause.)
And with us are our two national leaders of our
Independent Business Coalition, Pat Harrison and Miller Hicks -- both
here with us today -- here's Miller over here; and where's Pat?
Whoops, she didn't make the head table -- sitting out here.
(Laughter.) She should have; she's an outstanding business success.
Pat, stand up. And, Miller you've got to stand up and
let them see you. (Applause.) These people are pulling together
this national small business coalition -- Independent Business
Coalition, we call it.
Well, I've come here to Greensboro to talk about small
business -- and, really, to drive home for the nation the fact that
businesses, like the ones that come together in the Triad business
community, generate the hope and pride and the jobs that hold America
together.
Take Joe Koury -- a well-respected member of the Triad,
and the father of four beautiful daughters. Now, Joseph wasn't
always the one-man conglomerate that we see today. He started small:
began building his empire in the early years after World War II,
buying up the old Army barracks here in Greensboro and turning them
into housing -- sometimes for the same GIs who'd trained there before
going off to war, now come home to start a family. And that
ingenuity -- that spirit of enterprise -- that drive and dream tells
us the meaning of opportunity, the meaning in America. And it's all
over this great -- I don't want to start singling people out, but my
friend, Jack Laughery is another one right here from this state who
exemplifies the American Dream -- starting, taking risk, building.
And it's a wonderful thing, and it's a wonderful epitome of the
spirit of this state, in my view.
Now today, America's economy is working its way through
a period. of profound change. And, incidentally, it's not just
America, it's international change. You saw the recent ups and downs
in the international currency market. Other countries even now look
MORE
to our economy as the envy of the world. And you see it here in
North Carolina, these changes, just the way you do all across the
country. Many of our larger companies have retrenched and, indeed,
they've restructured -- and I know that these changes have been
difficult for many working Americans. But America's small businesses
have shown a staying power -- creating new products by the
thousands -- new jobs literally by the millions.
Let me give you one statistic that will drive home just
what I mean. In the 1980s, the numbers of workers employed by
Fortune 500 companies actually went down. But in that same decade,
small businesses boomed -- adding 16 million new jobs.
The simple fact is, small businesses are often the first
to adapt to a changing world -- the first to turn change to advantage
-- the force at the leading edge of economic recovery. And that's
why it is absolutely critical that we do all we can to strengthen
small businesses -- remove obstacles that stand in their way, and
create incentives that unleash America's entrepreneurial genius.
Helping small business reach for its dreams is key to my Agenda for
America Renewal.
I've set a goal -- to make America the first -- the
world's first $10-trillion economy in the early years of the 21st
Century. And when we get to that goal -- not if, but when -- and it
is very achievable -- look at the numbers -- it won't be the chairmen
of the Fortune 500 we have to thank -- it will be the men and women
who run the small businesses that power America -- (applause) -- the
men and women, for example, of the Triad business community.
Right now, small businesses employ over half of our
nation's workforce. Small businesses create two-thirds of the new
jobs in America. Small businesses are hothouses for innovation, and
risk-taking, new ideas -- the very engine of entrepreneurial
capitalism that pulls this economy forward.
And I know because I've been there myself. I did, as
Mr. Coble said, run a small business -- started it from the ground
up, with a lot of help, obviously, from coworkers and partners. And
I know what it's like to sweat out a deal, and shop for credit, stay
up late worrying how you're going to meet the next payroll. And I've
even got the ulcers, or had them back then, to prove it. And that is
a fact.
so let me tell you: I happen to think that meeting a
payroll is not a bad qualification for being President of the United
States of America. (Applause.)
And I might peripherally make the point that the
contrast with my opponent couldn't be clearer. He's spent almost his
entire adult life in government. And when he wasn't in government,
he practiced law and taught law school. And he even worked in the
Congress for his part-time Job. Not exactly the credentials we're
looking for these days: (Laughter.)
so it shouldn't surprise you that when it comes to the
economy, my opponent thinks government should lead -- all I ask you
to do is compare the plans -- directed by bureaucratic planners who
couldn't run a business anywhere but into the ground.
Now I believe government can play a role in helping
small business; no question. But it is a role of support -- not the
lead. Not to put the new bureaucracy of government planners in the
business of picking winners and losers -- but to help America do what
it does best: to make way for the American entrepreneur, the little
guy with the big idea. (Applause.)
so I've put together a program to strengthen small
business -- a program that will work, because it understands how
MORE
small businesses work. This is one important part of my
comprehensive Agenda for America Renewal.
I'm releasing the full program today in a report I call
"Encouraging Entrepreneurial Capitalism." Now, here is the report,
and I hope we can make some, at least, available to people here
today. But we can get them to you. That's a fancy name for small
business savvy America is known for. some of the ideas are ones that
we've been pushing for, for years -- some are new: All of them are
solid, sensible ways to strengthen small business.
Now, let me detail -- and some of this is quite detailed
-- what my program does:
First, it will help small businesses get started. You
see, many new businesses literally begin at home -- when
entrepreneurs convert their own "nest egg" into capital. Germany
does not tax capital gains at America's punitive rates -- neither
does Japan. One of them, I believe, is zero percent; and the other,
I believe, is Japan, is on percent. If we want to compete and win,
it's time to reward the risk-takers who turn their dreams into
tomorrow's jobs. It is time to cut the tax on capital gains.
(Applause.)
The liberals continue to insist that that's a break for
the rich. It isn't. It is clearly an incentive to start new
companies and employ more people. (Applause.) And because you've
got to crawl before you can walk, we're also helping small businesses
with an aggressive micro-loan program -- from a few hundred dollars
up to $25,000 at the critical early stages when new ventures are, I
think we would agree, that at that stage, new businesses are most
vulnerable.
That's how we'll help entrepreneurs get their ideas off
the ground, get their businesses up and running.
But today, I want to take our efforts one step further.
I am proposing a five-year, s20-billion small-business initiative --
to lift tax and regulatory burdens off the back of small business,
and to cut the costs of capital.
We start by knocking down the corporate tax rate on
small businesses from 15 to 10 percent. (Applause.) And this new
initiative will smooth the way for small business start-ups -- by
increasing the small business deduction limit from $10,000 to
$25,000. And it will allow entrepreneurs to deduct $2,500 of those
start-up costs that most of you remember in the very first year.
My initiative includes steps to simplify tax laws for
small businesses -- (applause) -- changes that will result in almost
$5 billion a year in tax relief -- and should allow most small
businesses to file a one- or two-page tax return. And finally, it
eliminates capital gains on newly-issued small business stock. That
will serve as an incentive to create new businesses
Part three of this small business program is to help
existing small businesses find credit. The best idea in the world
cannot work without capital. Entrepreneurs simply can't do it alone.
They need credit to set up shop and to expand.
Right now, you and I know that the credit crunch has hit
small businesses hard. That's why we've been working with bankers
and regulators across the country to free up the flow of credit to
companies like yours. Our regulatory reform, for example, by the
SEC, has made it easier for small businesses to raise capital through
stock, through these offerings of stock -- and to help growing firms
get from Main Street to wall street.
MORE
And I've had the small Business Administration -- I have
Pat saiki here working overtime to help credit-starved businesses.
This year alone, we have increased by more than 50 percent the loan
guarantees offered by her agency, the SBA -- more than $6 billion for
men and women with good ideas -- who want to turn those dreams into
jobs.
Small business is one of the most effective ways to
bring minority Americans into the economic mainstream. That's why
later today, Pat Saiki will release our plan to streamline the SBA's
Minority Small Business program to bring economic opportunity to
entrepreneurs all across America.
And tomorrow, Pat's going to go on to South Florida, to
kick off what we call the Green Line program -- a program that we
test-marketed up in New England -- to provide a revolving line of
credit to help small businesses bridge the gap between production and
payment. This Green Line initiative, incidentally, should be
especially helpful to small firms that are seeking to get back to
"business as usual" after Hurricane Andrew.
Now, fourth, we have got to help small businesses hire
new workers and increase productivity. Small businesses -- like
every employer in America -- will benefit from education reforms like
America 2000, our program from our expanded job training
initiatives, from enterprise zones, from legal reform that ends those
sky's-the-limit lawsuits that can drive a small business into
bankruptcy. We've got to do something about these crazy lawsuits.
Even all of that, though, is not enough.
That's why I support aggressive new export promotion
programs to help small businesses crack new markets abroad, and
create new jobs here at home. You see, in the 21st century, America
must be not just a military superpower, but an economic
superpower and an export superpower. And for a long time, it was
felt that small businesses were too little to sell abroad and compete
abroad. That' changed. And we want to facilitate more sales from
small business into this vast export market that lies ahead.
(Applause.)
Right now, a fraction of America's companies -- 15
percent -- account for 85 percent of America's exports. We've got to
open these new markets for America's small businesses -- we've got to
tap their explosive potential to make new customers not just down the
street, but around the world.
small business is already helping us pioneer new worlds
-- leading the way, for example, in the bio-tech, the bio-technology
revolution. That's one key reason that I strongly support a 100%
increase in federal research and development funds to help small
businesses generate the technologies of tomorrow.
And fifth, we've got to free small businesses from the
tangle of red tape and regulation. (Applause.) Vice President
Quayle has filled me in on a meeting that he had not long ago with
Richard Allen, who runs a furniture manufacturing company over in
High Point. Federal reporting rules have gotten so bad that he's has
to hire new staff just to read regulations. Now, frankly, that's one
kind of job creation we could do without. Filling out federal forms
should not be a full-time job.
That's why, in January of this year, I ordered a freeze
on federal regulations. You work long and hard for your success, and
you should spend your time doing business -- not doing paperwork.
(Applause.) And finally, we've got to help small businesses provide
for their workers, to help the 15 million Americans who are self-
employed. so I want to raise the deduction for health insurance from
25 percent to 100 percent. And I want to reform health insurance --
give small companies the same advantage that bigger companies have
MORE
when they shop for health care coverage, by encouraging small
companies to pool together to buy insurance.
We want to create tax incentives to help small
businesses offer their employees family leave -- not do what the
liberal Congress wants me to do -- slap another mandate on small
businesses' back. I'm not going to do that. (Applause.)
I believe in family l'eave, and I believe our approach to
facilitating family leave through tax credits is a far better way
than putting new mandates on a guy who is struggling to make ends
meet an would have to lay off people to meet the costs of that
program. We want to expand small businesses' ability to offer the
portable pensions people will need in a dynamic economy.
Taken together, that's a strong package -- a
comprehensive package -- to give real-world help, right now, to the
small businesses that make this economy grow. You'll notice a lot of
it, through tax relief, is removing the burden of government from the
back of small business.
Now, I think it's fair to say, and ask dispassionately:
What about my opponent? What is his plan for small business? The
difference could not be sharper. You see, I see small business as
the backbone of the American economy. Mr. Clinton, Governor Clinton
sees small business as the goose that lays the Golden Eggs.
Bill Clinton's got big plans for bigger government --
and to pay for it, he's got the tax plan for almost every day of the
week: Start with $150 billion in new taxes. That's not my saying
he's doing it; this is what he actually has proposed. And then add a
payroll tax for training -- he's already proposed that -- one-and-a-
half percent across the board for small businesses -- every business
-- and then add a health care plan that will lead to a 7 percent
payroll tax to finance the inevitable government takeover of health
care.
And I tell you, it's taxing just to talk about this
whole program ahead. (Applause.) Somebody said, that taxes my
memory. And Clinton says, that's a good idea, let's try it.
(Laughter and applause.) Now, I guess -- and yesterday -- nobody
believes this, but I did make a subconscious slip. I spoke up when I
was going on about the different plans, and I called him "Governor
Taxes." And I quickly corrected it.
But now, "Governor Taxes" says, yes, he wants to raise
taxes -- and rolls out his standard "soak the rich" rhetoric. You
listen to him. But what he won't tell you is this: two out of every
three people hit by Governor Clinton's tax hike would be small
business owners or family farmers. And these folks are not
millionaires -- they are Mom and Pop, Inc., and we cannot let them
slap a tax on small business. (Applause.)
Take a look at what Governor Clinton's tax plan would
mean for small businesses right here in this state. If you're like
the typical small business, you operate with a profit margin of about
2 percent. some clearly do better; some are struggling to make it 2
percent. Your market is too competitive for you to pass on costs by
raising prices. That can happen in large companies that dominate the
market. You can't do it as a small businessman. You already feel
bone. that you've already cut your costs, your operating costs, to the very
And so when Bill Clinton's new taxes kick in, you have a
choice -- a tough choice. His payroll taxes alone amount to 4
percent to 5 percent of your operating expenses. That's your profit
margin -- and then some.
MORE
So here's your choice: You can board up the windows --
or you can get out the pink slips. You can continue to operate, but
to do so you're going to have to lay off some on your rather small
workforce.
Now, I want to invite Governor Clinton and his advisors
to follow along for a little "business math." Just over half of all
small businesses with between 10 and 20 employees have annual sales
of $500,000 to $1 million. That's a 2 percent profit margin -- and
in the best case -- gives that business a -- say, a $20,000 profit.
Now, Governor Clinton's new taxes would cost that
company between $46,000 and $56,000 -- so after you've handed over
your profit to the government, the only way to pay the rest of the
tax is putting someone out of work, cutting down on your overall
payroll account.
And in the case of my example, that's two or three
employees -- two or three people out of less than a 20-person company
who lose their jobs.
Now, just think about that. Those two or three people
aren't just numbers -- they're not some names on a payroll sheet.
They're real people -- they're friends and neighbors -- men and women
with families to feed and mortgages to pay.
Now, if that two or three still doesn't sound like much,
keep this one in mind. In North Carolina alone, 25 percent of the
workers -- of all workers -- 638,000 people -- work in companies the
same size as the one in my example, companies that will be crippled
by Bill Clinton's new taxes.
Across this state, North Carolina has thousands of
businesses with less than 10 employees. Grocery stores -- more than
3,000. More than 2,500 small furniture stores. Four out of every
five companies in the building trades. Book stores, beauty shops
laundries, video stores and TV repair shops. And the list goes on
and on and on. And for them, Bill Clinton's tax plan means one
thing: Misery on Main Street. (Applause.)
You see, I don't think these central planners understand
this. America is a nation of small businesses -- and to those small
businesses, they'll take a big hit under Governor Clinton's tax plan.
And my opponent could not do more damage to America's risk-takers,
entrepreneurs, if he'd declared war on small businesses. Well, if
you're like me, you've got to say: Small business should not be big-
government's piccy bank. (Applause.)
All I ask is that you people here and the people across
the country take a look for a moment at my approach -- and then
contrast that with Governor Clinton's. You see, I want to strengthen
small businesses across America by lowering taxes -- increasing R&D.
Bill Clinton wants to tax small businesses and small
business owners so he can give big government a raise
I want to cut red tape, eliminate excessive regulation
and reform the ruinous legal system that's crippling this economy and
killing small businesses. (Applause.) We really must get these
suits under control. We are suing each other too much and caring for
each other too little in this country. (Applause.) Now, Bill
Clinton wants to saddle these -- or, his plan would saddle these new
small businesses with new mandates; the old ones, too, the existing
ones. New or old, small businesses, all with new mandates. And he's
told the trial lawyers of America he wouldn't take away even one
little loophole.
How about health care? Job training? Family leave?
MORE
- 7 -
I want to reform our health care system -- extend
coverage to all Americans, and use the markets to drive costs down
while keeping quality -- the great quality of American health care
up. And as I said before, Bill Clinton's plan will mean a payroll
tax and more government control.
I want to give displaced workers a voucher to get the
training they want. And Bill Clinton wants to put a payroll tax on
employers.
I want to use tax credits to encourage businesses to
provide workers family leave. well, my opponent? You see the
pattern -- more government rules, more government red tape.
You know, they sent this family leave bill down to me
the other day. They sent it down just for fine timing in terms of
politics. And I vetoed it, and I sent it right back. I am for
family leave, but I am not for putting further mandates on small
business. Let's do it through tax relief, not through running people
out of business. (Applause.)
Bill Clinton's got a "Punt, pass and kick" plan: Punt
the problem over to business. Pass the costs along. And kick the
American worker -- right where he carries his wallet. (Applause.)
NOW, you've got a choice in this election. A choice
between two different philosophies -- two different directions to
take this great country. Bill Clinton puts his faith in the so-
called "best and brightest:" In his old Oxford cronies who believes
that "government knows best" -- just like the social welfare crowd
that pulled Britain down before Maggie Thatcher and John Major pumped
some life back in.
Well, I put my faith in the American people -- and I
want to see you keep control of the decisions that really matter in
life. And when Bill Clinton says "government knows best" -- I say:
You know better.
Let me sum it up this way: His plan is wrong for
America. And mine is right. (Applause.)
Here's what Bill Clinton and the "government first"
crowd just really don't get. They don't get it. They don't
understand: Government can print money -- but it simply cannot
create wealth. The great ideas that make this economy grow don't
begin in the marbled halls of some federal building back in
Washington, D.C. More great ideas -- more of our gross domestic
product, our GDP -- begins at a basement workbench, at a computer on
someone's kitchen table, with the savings you set aside to start a
business of your own.
And, America -- don't let them teach the American
people, particularly the young. that America is a nation in decline.
We are simply not. We are the most respected leader in the world --
militarily, and economically. (Applause.) And in spite of the
economic difficulties we've had and are enduring, America -- believe
me -- is the envy of the world: not because its government is
great -- but because its people are great. Because the American
people are builders and dreamers who build.
We need a government that understands that fundamental
fact. And my program -- my Agenda for American Renewal -- will make
the next American Century a new American Century, a time of peace and
prosperity for all.
Thank you once again for this warm North Carolina
welcome -- and may God bless the United States of America.
Thank you very much. (Applause.)
END
9:22 A.M. EDT
SEP 18 '92 10:49 S.B.A.
P.1
SBA
U.S. Small Business Administration
Washington, DC
Office of Public Communications
FAX
Transmission Sheet
Date
9-18
Time
Page 1 of 4
Subject Small business facts
Person
Office, firm or division
FAX
Voice
Number
Number
To Carol aarhus
456-6218
From Donaa Harper OPC
(202) 205-6913
205-6740
Optional Message
Call (202) 205-6740 if this FAX transmission was not received in its entirety.
-
Check if you would like the receiving office to confirm receipt of this FAX
Receiving office, firm or division
Receipt date
Receipt Time
SMALL JIN23:2 !ding meriods Name
Small
Business Incorporations, Bankrupicies, and Failures,
Nonfarm Sole Proprietorships, 1980 and 1988
Business
1988 and 1989
(Thousands)
U-ASK-SBA
Answer Card
Percent Change
Percent Change
1988
1989
1988-1989
1980
1988
1980-1988
Whether you're looking for information "B
15459
1991
Income
Men-Owned
6,928
10,028
44.7
starting a new business or for sources
Bankruptcies
62,845
62,449
-0.6
WHAT wind
technical and financial assistance for and
alima
7019
1070
es
Jointly Owned
266
520
95.5
already existing business, the SBA's Sm
99.6% of all employers in 1988
Sources: Dun and Bradstreet (Incorporations and Failures);
Note Most small businesses are proprietorships.
Administrative Office. U.S. Courts (Bankruptcies).
Business Answer Desk can help you.
oyed 58% of the private work force
Source: Internal Revenue Service.
8
ded 55% of Innovations in 1988
Nonfarm Business Tax Returns for Corporations,
Partnerships, and Proprietorships, 1987-1989 (Thousands)
Business Dissolution Rates (Percent)
Toll Free
inted for 50% of private sector
1 in 1988
Age of
Year
Corps.
Parts.
Props.
Total
Business
All
Growing
Nongrowing
So call us at our new telephone number:
up 39% of GNP in 1982
(Years)
Firms
Firms
Firms
inted for 15.6% of federal prime
800-U-ASK-SBA
act dollars in 1988
1988
4,027
1,826
13,126
18,979
1997
4
51.7
19.1
65.5
(that's 800-827-5722)
ded 48.5% of all new jobs from
725
to 1988
Percent Change,
ISWEE Card is published annually by the U.S.
1987-1989
11.5
6.9
9.5
9.7
Note: Growing firms are defined as those adding at least one job
The Small Business
during each of the respective periods. This analysis is based on a
istration. Office of Advecacy, Washington, DC
5 programs and services are extended to the
Note: 1999 data are estimated and 1988 data have been revised.
sampling of lims that entered the Small Business Data Base between
1976 and 1978.
Answer Desk
inatory basis.
Seurce: Internal Revenue Service.
Source: U.S. Small Business Administration.
9D-00.3
and Black-Owned Firms, 1982-1987
Change in Employment in Small- and Large-Business-
Fastesi Growing Industries: December 1988 to December
Industries Generating Most New Jobs: December 1988
Dominated Industries, 1988 to 1989 (Percent)
1989 (Percent Change in Employment)
to December-1989 (Thousands)
Percent
Change
Small-Business-
Large-Business-
Percent Change
Employment
Dominated
Industry
1988-1989
Dominated
Industry
Increases
1982
1987
1982-1987
Industry
Small-Business-Dominated
Small-Business-Dominated
Directions scilles
Eating and Drinking Places
107.0
Mining
-0.1
4.3
THE
Medical and Dental Laboratories
14.6
Office of Physicians
101.3
"Construction"
308
424
37.6
Manufacturing
0.3
-0.7
Maltin Perrouch Stategraphics
Computer and Data Processing Services
79.2
Automotive Rentals, Without Drivers
13.0
Trucking and Trucking Terminals
69.4
Transport him:
Special
15
Miscalaneous Business Services
61.2
6 ol $)
Wholesale Trade
3.0
NA
11.0
Outpatient Care Facilities
57.9
26
Computer and Data Processing Services
218.138 183
404
Machinery Equipmentand Supplies
57.6
Finance
3.3
1.6
9,619
19,763
105.5
Residential Care
9.3
Residential Care
37.7
Services
Sporting burder DUE and Hobby Goods
Mailing: Reproduction and Stenographic
33.3
ent of Commerce, Bureau of Census.
NA = Not applicable. There was a lack of Industry representation
School Buses
7.9
Engineering and Architectural Services
30.3
within the size category.
Large-Business-Dominated
Large-Business-Dominaled
are of Growth, 1984-1988
Source: Adapted by the U.S. Small Business Administration, from
Pictural adviction and envides
147
Hospitals
194.1
data published by the Bureau of Labor Statistics.
Air Transportation
11.9
Grocery Stores
133.7
Employees
Self-Employment in Nonagricultural Industries, 1980
10.0
AT Transportation
68.7
All Firms
<100
and 1989 (Thousands)
Medical Services and Health Insurance
6.0
Educational Services
37.7
<500
THE
insurance
6.0
Colleges and Universities
27.1
Percent Change
Hospitals
5.7
Commercial and Stock Savings Banks
21.9
1980
1989
1980-1989
STORM Store
Difand Gas Extraction
216
11.143
4.421
5.408
Holding and Other Investment Offices
3.7
Motion Picture Production and Services
18.6
Total
8519
26
Medical Services and Health Insurance
18.6
Men
5,564
5,562
-0.1
100.0
39.6
48.5
Gas Production and Distribution
2.1
Air Transportation Services
9.2
Women
2,955
3,043
Source: Adapted by the U.S. Small Business Administration, from
Source: Adapted by the U.S. Small Business Administration from
usiness Administration.
Source: Bureau of Labor Statistics.
data published by the Bureau of Labor Statistics.
data published by the Bureau of Labor Statistics.
SBA
Small businesses
were 9!
employ
in 1988
provide
accoun
output
made u
accoun
contrac
provide
1984 to
The Small Business Ans
Small Business Adminis
20416. All of the SBA's I
public on a nondisorimir
Growth of Women- a
Firms (Thousands)
CUM Lowned
Black-owned
Receipts (Millions 4
Black-owned
Source U.S. Departmer
Small Business Shai
Jobs Generated
Extended Page
(Millions)
Share of Growth
(Percent)
SEP 18 '92 10:51 S.B.A.
P.3
FACTS ABOUT U.S. SMALL BUSINESS
ECONOMIC IMPACT
* SUMMARY STATEMENT: Small businesses today employ more than 50
percent of the U.S. work force, account for 44 percent of all
sales, generate 39 percent of the GNP, and have been responsible
for 55 percent of the country's technical and industrial
innovations since World War II.
JOBS
* Small businesses continue to provide two of every three workers
(67 percent) with their first job and thus are responsible for most
of the initial on-the-job training.
* Most new jobs are created by small firms. The 1980s can truly be
called an economic miracle - the longest peacetime economic
expansion in history, with over 20 million new jobs created during
that time. Small businesses led this expansion; small companies
with fewer than 500 employees added about 12.5 million additional
workers during the 1980s, while the Fortune 500 companies,
employment actually declined by a total of 3.1 million jobs.
* Over one-tenth (13 percent) of the labor force - 15.6 million
workers employment). - are self-employed (that includes part-time self-
INNOVATION
* Much of the innovation in this country comes from small
businesses. Small firms produce about 2.4 times as many innovations
per employee as large firms.
EXPORTING
* Forty percent of all firms that export are small businesses.
* Every billion dollars in exports creates 26,000 new jobs.
GENERAL
* Smaller businesses contribute more to their communities - in
terms of cash and in-kind services - on a per employee basis than
do their larger corporate cousins.
reasons. * Most businesses do not actually fail, but close for voluntary
SEP 18 '92 10:52 S.B.A.
P.4
WOMEN AND MINORITIES
* Small business provides the best opportunity for economic
empowerment to this country's fastest-growing and most dynamic
groups. women and minorities.
* Although small businesses have been hit hard by the recession,
this sector continues to create new jobs, provide sources of
business innovation and open the door of opportunity for all
American entrepreneurs--regardless of race, sex or background.
WOMEN
*
Women are starting businesses at twice the rate of men.
- The most recent Census Bureau statistics show that 30
percent of all small businesses in the U.S. are women-owned.
- If the trend continues, nearly 40 percent of all small
businesses will be women-owned by the turn of the century.
* Receipts of women-owned firms increased 183 percent between 1982
and 1987, from $98.3 billion to $278.1 billion.
Women own more than 400,000 corporations and partnerships.
The total number of businesses owned by women increased about 58
percent from 1982 to 1987. This rate of growth is more than four
times the rate for all businesses (14 percent).
* Women-owned businesses continue to demonstrate their growing
importance as providers of jobs for American workers. Between 1982
and 1987, the number of women-owned businesses with paid employees
nearly doubled. As of 1987, women-owned businesses employed over
three million workers.
SEP 18 '92 10:52 S.B.A.
P.5
MINORITIES
SBA estimates there are now approximately 1 million minority -
owned businesses nationally.
During the 1980's, the number of black-owned businesses grew
by almost 40 percent, from just over 300,000 to 424,000.
The most recent Census Bureau statistics show more than
422,000 Hispanic-owned businesses nationally. an increase of
81 percent from 1982.
- The most recent Census Bureau statistics show more than
355,000 businesses were owned by Asian Americans an increase
of 89 percent from 1982.
* Businesses owned by minorities had almost $80 billion in sales in
1987.
* The number of businesses owned by American Indians and Alaska
natives rose by 57.5 percent between 1982 and 1987. The number of
Black-owned businesses rose 38 percent during the same time.
* The number of Black-owned manufacturing businesses more than
doubled from 1982 to 1987, from 3,707 to 8,004.
* Black-owned businesses with employees rose by 87 percent from
1982 to 1987, from 37,841 to 70,815.
* The number of Hispanic-owned businesses rose 80.5 percent from
1982 to 1987. This rate of growth is almost six times the rate for
all businesses (14 percent), from 233,975 in 1982 to 422,373 in
1987.
* As of 1987, Hispanic-owned businesses accounted for roughly 3.1
percent of all U.S. businesses.
* Between 1982 and 1987, the number of businesses owned by Asian
Americans and Pacific Islanders rose 89.3 percent.
* The number of businesses owned by Vietnamese Americans increased
more than five-fold from 1982 to 1987, from 4,989 to 25,671.
* The total receipts of businesses owned by Asian Americans and
Pacific Islanders rose 161.8 percent during that period.
* Note: Source for all of the data on women and minorities is from
the Bureau of the Census.
Stephanie- -
came in ,
are !
Carol
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
September 23, 1992
Encouraging Entrepreneurial Capitalism:
Strengthening Small Businesses
FACT SHEET
President Bush announced today a comprehensive program for
strengthening our Nation's small businesses, including a five-
year, $20 billion initiative to reduce capital costs directly
and to reduce the paperwork burdens that fall heavily on small
businesses.
The initiative includes:
Reducing the lowest corporate tax rate for small
businesses from 15 percent to 10 percent;
Increasing the current equipment expensing limit from
$10,000 to $25,000;
Eliminating capital gains taxes on newly-issued small
business stock;
Permitting the immediate write-off of up to $2,500 of the
front-end costs of starting a new business; and
Simplifying the tax laws so that most small businesses can
file their returns on one or two pages.
I.
Helping Small Businesses Get Started
The Administration has proposed tax policies and
innovative programs to give incentives for entrepreneurship.
A.
Expanding Tax Incentives to Start Small Businesses
Reducing Capital Gains.
Today the President proposed to eliminate the capital
gains tax on small business start-ups. Under the
President's proposal, capital gains earned from
qualified investments held for five years in certain
small business corporations would qualify for a 50
-2-
percent exclusion. In addition, for each additional
year the investment is held, the exclusion is
increased by ten percent. Investments held for ten
years or more will be exempt from capital gains
taxation. The proposal would cover investments in
small businesses with up to $10 million in assets or
receipts.
Expensing Start-Up Costs.
The President also proposed to permit the immediate
write-off of up to $2,500 of the initial costs of
organizing a new business. (Under current law,
allowable business start-up expenditures must be
capitalized and amortized over at least five years.)
Direct expensing of a portion of these costs will
reduce the cost of capital necessary to start a
business.
The new write-off provisions would be applicable to
expenditures made after December 31, 1992 to start up
a business that has less than $500,000 in sales in
its first full year of operation.
B.
Providing Additional Assistance to Entrepreneurs
Facilitating Equity Investments.
The President recently signed legislation authorizing
the SBA to guarantee new equity-type investments in
Small Business Investment Companies (SBICs). The
SBICs would, in turn, use the proceeds to make equity
investments in small businesses.
Providing Micro-Loans.
The Small Business Administration (SBA) is
implementing a $45 million program to offer unsecured
micro-loans of up to $25,000 to small businesses.
II. Helping Small Businesses Reduce the Cost of Capital
President Bush today proposed a five-point initiative to
reduce the cost of capital and simplify the tax code for
small businesses. In addition to reducing or eliminating
the capital gains tax on newly-issued small business stock
and permitting the immediate write-off of up to $2,500 of
the initial costs of starting a small business, the
President proposed to:
-2-
percent exclusion. In addition, for each additional
year the investment is held, the exclusion is
increased by ten percent. Investments held for ten
years or more will be exempt from capital gains
taxation. The proposal would cover investments in
small businesses with up to $10 million in assets or
receipts.
Expensing Start-Up Costs.
The President also proposed to permit the immediate
write-off of up to $2,500 of the initial costs of
organizing a new business. (Under current law,
allowable business start-up expenditures must be
capitalized and amortized over at least five years.)
Direct expensing of a portion of these costs will
reduce the cost of capital necessary to start a
business.
The new write-off provisions would be applicable to
expenditures made after December 31, 1992 to start up
a business that has less than $500,000 in sales in
its first full year of operation.
B.
Providing Additional Assistance to Entrepreneurs
Facilitating Equity Investments.
The President recently signed legislation authorizing
the SBA to guarantee new equity-type investments in
Small Business Investment Companies (SBICs). The
SBICs would, in turn, use the proceeds to make equity
investments in small businesses.
Providing Micro-Loans.
The Small Business Administration (SBA) is
implementing a $45 million program to offer unsecured
micro-loans of up to $25,000 to small businesses.
II. Helping Small Businesses Reduce the Cost of Capital
President Bush today proposed a five-point initiative to
reduce the cost of capital and simplify the tax code for
small businesses. In addition to reducing or eliminating
the capital gains tax on newly-issued small business stock
and permitting the immediate write-off of up to $2,500 of
the initial costs of starting a small business, the
President proposed to:
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
September 23, 1992
Encouraging Entrepreneurial Capitalism:
Strengthening Small Businesses
FACT SHEET
President Bush announced today a comprehensive program for
strengthening our Nation's small businesses, including a five-
year, $20 billion initiative to reduce capital costs directly
and to reduce the paperwork burdens that fall heavily on small
businesses.
The initiative includes:
Reducing the lowest corporate tax rate for small
businesses from 15 percent to 10 percent;
Increasing the current equipment expensing limit from
$10,000 to $25,000;
Eliminating capital gains taxes on newly-issued small
business stock;
Permitting the immediate write-off of up to $2,500 of the
front-end costs of starting a new business; and
Simplifying the tax laws SO that most small businesses can
file their returns on one or two pages.
I.
Helping Small Businesses Get Started
The Administration has proposed tax policies and
innovative programs to give incentives for entrepreneurship.
A.
Expanding Tax Incentives to Start Small Businesses
Reducing Capital Gains.
Today the President proposed to eliminate the capital
gains tax on small business start-ups. Under the
President's proposal, capital gains earned from
qualified investments held for five years in certain
small business corporations would qualify for a 50
-3-
A.
Reduce the corporate tax rate for small businesses
from 15 percent to 10 percent. The President
proposed to reduce the tax rate on the first $50,000
of a corporation's taxable income from 15 percent to
10 percent. The proposed new corporate tax rate
would become effective on January 1, 1993.
B.
Increase the current expensing limit from $10,000 to
$25,000. Under current tax law, a small business may
deduct up to $10,000 of the cost of business or
income-producing equipment in the year it is placed
in service. The President proposed to increase the
maximum allowable deduction from $10,000 to $25,000.
This $25,000 maximum would be reduced for each dollar
of eligible equipments' cost above $200,000. Thus,
no expense deduction would be allowed when the cost
of eligible equipment exceeds $225,000.
C.
Simplify the tax laws SO that most small businesses
can file their returns on one or two pages. This
includes:
AMT Relief for Business Tax Preferences
Under the President's proposal, certain business
preferences and adjustments arising from qualifying
small corporations (including adjustments for
depreciation, depletion, intangible drilling costs
and other expenses) would no longer be subject to
alternative minimum tax. In addition, active
participants in qualifying unincorporated businesses
would not be required to include these preferences
and adjustments in determining their individual AMT.
Inflation-adjusted inventory accounting rules
Taxpayers with gross receipts under $10 million could
elect to use an inflation-adjusted FIFO (First In,
First Out) method of accounting for inventory.
Inventories would be indexed using inflation
adjustment factors based on an overall price index,
such as the Consumer Price Index, to eliminate the
effects of inflation from the determination of
taxable income.
Exemption from uniform capitalization rules
The President's proposal exempts taxpayers with gross
receipts under $10 million from the uniform rules
governing capitalization of direct and indirect costs
associated with the production of property. In
addition, very small producers (those with gross
-4-
receipts under $1 million) would be required to
capitalize only direct costs attributable to
production activities, and could expense all indirect
costs associated with their production activities.
This will permit small businesses to avoid making
costly and burdensome cost allocations solely for the
purpose of computing tax liability.
Exemption from long-term contract rules
Under current law, taxable income from long-term
contracts is determined under the percentage of
completion method (PCM) of accounting.
The President proposes to expand the current
exemption from the PCM requirements to any long-term
contract being performed by a contractor with average
gross receipts under $10 million.
Pension rule simplification
The President proposed several changes to simplify
pension rules and expand pension options for small
businesses, including:
--
Permitting small businesses with less than 100
employees that have no pension plan to sponsor a
Small Business Model Retirement Plan for its
employees. An employer who sponsors a Small
Business Model Retirement Plan must contribute
one percent of pay to an account for each
participating employee.
Employees could elect to defer a portion of his
or her compensation to the account, up to a
maximum of $3,000. To encourage employees to
elect deferrals, the employer must make a
matching contribution to the first 3 percent of
compensation that an employee elects to defer,
plus 50 percent of elective deferrals
representing between 3 percent and 5 percent of
the employee's compensation.
-- Repealing certain family aggregation rules that
apply for pension plan purposes;
-- Permitting certain tax-exempt employers
(including trade associations and credit unions)
to adopt Section 401 (k) retirement plans for
their employees; and
-4-
receipts under $1 million) would be required to
capitalize only direct costs attributable to
production activities, and could expense all indirect
costs associated with their production activities.
This will permit small businesses to avoid making
costly and burdensome cost allocations solely for the
purpose of computing tax liability.
Exemption from long-term contract rules
Under current law, taxable income from long-term
contracts is determined under the percentage of
completion method (PCM) of accounting.
The President proposes to expand the current
exemption from the PCM requirements to any long-term
contract being performed by a contractor with average
gross receipts under $10 million.
Pension rule simplification
The President proposed several changes to simplify
pension rules and expand pension options for small
businesses, including:
:
Permitting small businesses with less than 100
employees that have no pension plan to sponsor a
Small Business Model Retirement Plan for its
employees. An employer who sponsors a Small
Business Model Retirement Plan must contribute
one percent of pay to an account for each
participating employee.
Employees could elect to defer a portion of his
or her compensation to the account, up to a
maximum of $3,000. To encourage employees to
elect deferrals, the employer must make a
matching contribution to the first 3 percent of
compensation that an employee elects to defer,
plus 50 percent of elective deferrals
representing between 3 percent and 5 percent of
the employee's compensation.
--
Repealing certain family aggregation rules that
apply for pension plan purposes;
--
Permitting certain tax-exempt employers
(including trade associations and credit unions)
to adopt Section 401 (k) retirement plans for
their employees; and
-3-
A.
Reduce the corporate tax rate for small businesses
from 15 percent to 10 percent. The President
proposed to reduce the tax rate on the first $50,000
of a corporation's taxable income from 15 percent to
10 percent. The proposed new corporate tax rate
would become effective on January 1, 1993.
B.
Increase the current expensing limit from $10,000 to
$25,000. Under current tax law, a small business may
deduct up to $10,000 of the cost of business or
income-producing equipment in the year it is placed
in service. The President proposed to increase the
maximum allowable deduction from $10,000 to $25,000.
This $25,000 maximum would be reduced for each dollar
of eligible equipments' cost above $200,000. Thus,
no expense deduction would be allowed when the cost
of eligible equipment exceeds $225,000.
C.
Simplify the tax laws so that most small businesses
can file their returns on one or two pages. This
includes:
AMT Relief for Business Tax Preferences
Under the President's proposal, certain business
preferences and adjustments arising from qualifying
small corporations (including adjustments for
depreciation, depletion, intangible drilling costs
and other expenses) would no longer be subject to
alternative minimum tax. In addition, active
participants in qualifying unincorporated businesses
would not be required to include these preferences
and adjustments in determining their individual AMT.
Inflation-adjusted inventory accounting rules
Taxpayers with gross receipts under $10 million could
elect to use an inflation-adjusted FIFO (First In,
First Out) method of accounting for inventory.
Inventories would be indexed using inflation
adjustment factors based on an overall price index,
such as the Consumer Price Index, to eliminate the
effects of inflation from the determination of
taxable income.
Exemption from uniform capitalization rules
The President's proposal exempts taxpayers with gross
receipts under $10 million from the uniform rules
governing capitalization of direct and indirect costs
associated with the production of property. In
addition, very small producers (those with gross
-5-
--
Eliminating the special aggregation rules that
apply to retirement plans for self-employed
individuals.
III. Helping Small Businesses Get Access to Credit
A.
Providing Assistance Through the SBA.
In 1992 the Administration provided a record $6
billion in loan authority to permit the SBA to
guarantee small business loans.
Under the New England Lending and Recovery Project,
the SBA restructures small business loans held by the
FDIC as a result of bank failures.
B.
Encouraging Bank Lending.
The Administration has worked with bank regulators
and conducted extensive meetings with bankers,
examiners, and borrowers nationwide to increase the
availability of funds. Earlier this month, Treasury
Secretary Brady met with top banking industry
executives to encourage a strong focus on small
business lending.
The Administration has also worked with bank
regulators in issuing over 30 regulatory changes to
increase credit availability.
C.
Opening Up Equity Markets to Small Business.
The President's regulatory review and moratorium has led
to a series of small business initiatives by the
Securities and Exchange Commission, including:
Allowing issuers of "seed capital" offerings to issue
up to $1 million per year in securities and be exempt
from SEC registration requirements;
Raising from $1.5 million to $5 million the ceiling
on Regulation A limited public offerings, using
simplified disclosure procedures; and
Fostering investment by mutual funds in small
businesses.
-6-
D.
Providing Disaster Assistance.
More than $2 billion in loan authority has been provided
this fiscal year to help small businesses recover from the
effects of devastating natural disasters, including
Hurricanes Andrew and Iniki and the Los Angeles riots.
The SBA has streamlined the application process.
IV. Helping Small Businesses Expand Employment and Increase
Productivity
A.
Supporting Innovative Research.
The Administration supports or has proposed a number of
measures to increase investment in research and
development, including:
Making the Research & Experimentation tax credit
permanent; and
Doubling the percentage of Federal R&D budget that is
set aside for small business under the Small Business
Innovation Research (SBIR) program from 1.25 percent
to 2.5 percent.
Today President Bush directed agencies participating
in the SBIR program to implement a Commercialization
Assistance Project. The project will place
participating small businesses in contact with
established companies to improve the skills necessary
to access credit.
B.
Improving the Quality of Our Workforce.
The President has proposed to revolutionize American
education through his America 2000 program, and to
streamline, expand and improve the accountability of
Federal job training programs.
C.
Reforming Our Legal System.
President Bush has proposed and supported legislation to
reform our civil justice system, particularly in the areas
of product liability and tort law, to encourage early
settlement of disputes, adopt the "Loser Pays" rule to
require the loser to pay the winner's legal fees in
certain circumstances, and to limit excessive punitive
damage awards.
-6-
D. Providing Disaster Assistance.
More than $2 billion in loan authority has been provided
this fiscal year to help small businesses recover from the
effects of devastating natural disasters, including
Hurricanes Andrew and Iniki and the Los Angeles riots.
The SBA has streamlined the application process.
IV. Helping Small Businesses Expand Employment and Increase
Productivity
A.
Supporting Innovative Research.
The Administration supports or has proposed a number of
measures to increase investment in research and
development, including:
Making the Research & Experimentation tax credit
permanent; and
Doubling the percentage of Federal R&D budget that is
set aside for small business under the Small Business
Innovation Research (SBIR) program from 1.25 percent
to 2.5 percent.
Today President Bush directed agencies participating
in the SBIR program to implement a Commercialization
Assistance Project. The project will place
participating small businesses in contact with
established companies to improve the skills necessary
to access credit.
B.
Improving the Quality of Our Workforce.
The President has proposed to revolutionize American
education through his America 2000 program, and to
streamline, expand and improve the accountability of
Federal job training programs.
C.
Reforming Our Legal System.
President Bush has proposed and supported legislation to
reform our civil justice system, particularly in the areas
of product liability and tort law, to encourage early
settlement of disputes, adopt the "Loser Pays" rule to
require the loser to pay the winner's legal fees in
certain circumstances, and to limit excessive punitive
damage awards.
-5-
--
Eliminating the special aggregation rules that
apply to retirement plans for self-employed
individuals.
III. Helping Small Businesses Get Access to Credit
A.
Providing Assistance Through the SBA.
In 1992 the Administration provided a record $6
billion in loan authority to permit the SBA to
guarantee small business loans.
Under the New England Lending and Recovery Project,
the SBA restructures small business loans held by the
FDIC as a result of bank failures.
B.
Encouraging Bank Lending.
The Administration has worked with bank regulators
and conducted extensive meetings with bankers,
examiners, and borrowers nationwide to increase the
availability of funds. Earlier this month, Treasury
Secretary Brady met with top banking industry
executives to encourage a strong focus on small
business lending.
The Administration has also worked with bank
regulators in issuing over 30 regulatory changes to
increase credit availability.
C.
Opening Up Equity Markets to Small Business.
The President's regulatory review and moratorium has led
to a series of small business initiatives by the
Securities and Exchange Commission, including:
Allowing issuers of "seed capital" offerings to issue
up to $1 million per year in securities and be exempt
from SEC registration requirements;
Raising from $1.5 million to $5 million the ceiling
on Regulation A limited public offerings, using
simplified disclosure procedures; and
Fostering investment by mutual funds in small
businesses.
-7-
D.
Expanding and Opening Foreign Markets.
The Small Business Administration and the Department of
Commerce have provided information, counseling, training
and financing to thousands of small businesses who seek to
export their products to new markets overseas.
E. Creating Enterprise Zones
President Bush has proposed to create enterprise zones in
inner cities and rural areas that suffer from a lack of
economic opportunities for their residents. A number of
tax incentives would be provided for enterprise zone
workers, investors and businesses, including an employee
wage credit, expensing of certain stock investments, and
an exclusion of most capital gains.
V.
Clearing Away the Regulatory Maze
The Administration has announced several reforms that will
reduce the costs and burdens imposed on small businesses in
complying with the Federal tax system.
A.
Reducing the Costs of the Payroll Tax System.
Several initiatives will reduce administrative costs for
the more than 3.5 million small employers who must report
employment taxes, including:
Permitting up to 75 percent of all employers to make
payroll tax deposits once a month, and to make those
deposits electronically;
Creating a new simplified Federal employment tax form
for small businesses;
Establishing a single wage-reporting system to
eliminate duplicate filing of Form W-2 and other
payroll tax information; and
Allowing employers to verify employees' tax
identification numbers by telephone.
B.
Reduce Other Tax-Related Burdens.
Additional reforms will allow:
Deductibility of Preparation Fees. On April 1, 1992,
the IRS released a ruling allowing more than 16
million sole proprietors, including farmers, to
-8-
deduct business-related tax preparation fees as a
business expense rather than as a limited itemized
deduction.
Joint Federal-State Filing. The IRS is working with
States on a pilot program for the joint electronic
filing of Federal and State tax returns. In 1992,
the IRS implemented this program State-wide in South
Carolina and on a more limited basis in six other
States. The IRS expects to add additional States
during the coming year.
Educational Initiatives for Small Businesses. In the
past year, the IRS has informally contacted over
150, 000 small businesses having difficulty complying
with Federal tax deposit requirements. The IRS is
now working with these taxpayers, outside the formal
audit and enforcement context, to address compliance
concerns.
VI. Helping Small Businesses Provide for Their Workers
Small businesses need help in providing benefits that will
give their employees economic security. These benefits
include:
A.
Affordable Health Care.
Eighty five percent of workers and dependents without
health insurance work for firms with fewer than 100
employees. The President's Comprehensive Health Reform
Plan would:
Allow small employers to form Health Insurance
Networks to give small employers the purchasing clout
of à large group;
Require insurers to offer insurance to all small
groups if they sell health insurance to any small
groups. Insurers would also be required to offer
insurance to all members of the group and could no
longer exclude particular individuals who the insurer
thought would have high medical expenses;
Ensure affordable insurance rates for small groups
with one or more very sick individuals, initially
through rate limitations and, over time, through
risk-pooling; and
-8-
deduct business-related tax preparation fees as a
business expense rather than as a limited itemized
deduction.
Joint Federal-State Filing. The IRS is working with
States on a pilot program for the joint electronic
filing of Federal and State tax returns. In 1992,
the IRS implemented this program State-wide in South
Carolina and on a more limited basis in six other
States. The IRS expects to add additional States
during the coming year.
Educational Initiatives for Small Businesses. In the
past year, the IRS has informally contacted over
150, 000 small businesses having difficulty complying
with Federal tax deposit requirements. The IRS is
now working with these taxpayers, outside the formal
audit and enforcement context, to address compliance
concerns.
VI. Helping Small Businesses Provide for Their Workers
Small businesses need help in providing benefits that will
give their employees economic security. These benefits
include:
A.
Affordable Health Care.
Eighty five percent of workers and dependents without
health insurance work for firms with fewer than 100
employees. The President's Comprehensive Health Reform
Plan would:
Allow small employers to form Health Insurance
Networks to give small employers the purchasing clout
of a large group;
Require insurers to offer insurance to all small
groups if they sell health insurance to any small
groups. Insurers would also be required to offer
insurance to all members of the group and could no
longer exclude particular individuals who the insurer
thought would have high medical expenses;
Ensure affordable insurance rates for small groups
with one or more very sick individuals, initially
through rate limitations and, over time, through
risk-pooling; and
-7-
D.
Expanding and Opening Foreign Markets.
The Small Business Administration and the Department of
Commerce have provided information, counseling, training
and financing to thousands of small businesses who seek to
export their products to new markets overseas.
E.
Creating Enterprise Zones
President Bush has proposed to create enterprise zones in
inner cities and rural areas that suffer from a lack of
economic opportunities for their residents. A number of
tax incentives would be provided for enterprise zone
workers, investors and businesses, including an employee
wage credit, expensing of certain stock investments, and
an exclusion of most capital gains.
V.
Clearing Away the Regulatory Maze
The Administration has announced several reforms that will
reduce the costs and burdens imposed on small businesses in
complying with the Federal tax system.
A.
Reducing the Costs of the Payroll Tax System.
Several initiatives will reduce administrative costs for
the more than 3.5 million small employers who must report
employment taxes, including:
Permitting up to 75 percent of all employers to make
payroll tax deposits once a month, and to make those
deposits electronically;
Creating a new simplified Federal employment tax form
for small businesses;
Establishing a single wage reporting system to
eliminate duplicate filing of Form W-2 and other
payroll tax information; and
Allowing employers to verify employees' tax
identification numbers by telephone.
B.
Reduce Other Tax-Related Burdens.
Additional reforms will allow:
Deductibility of Preparation Fees. On April 1, 1992,
the IRS released a ruling allowing more than 16
million sole proprietors, including farmers, to
-9-
Permit the self-employed to deduct 100 percent of
their health care insurance premiums as opposed to
the 25 percent they currently are permitted to
deduct.
B.
Tax Incentives for Family Leave Policies.
President Bush has proposed to provide tax credits to
businesses with fewer than 500 employees that adopt non-
discriminatory leave policies related to childbirth,
adoption or serious family health problems. The employer
would be eligible for a tax credit equal to 20 percent of
the cash wages that the employer provided (or would have
provided) to the employee during the period of family
leave, up to a maximum of $20 of credit per business day
and a maximum of $1,200 of credit per employee per year.
The employer must continue to provide health benefits and
other employment protections and benefits to employees on
family leave.
C.
Retirement Security.
In July 1992, the President signed legislation
increasing pension portability and enhancing
retirement security for workers who change jobs by
permitting workers to rollover their accrued pension
benefits directly into another retirement plan or an
Individual Retirement Account.
The President also proposes to:
--
Reduce and simplify the administrative
requirements for pension plans offered by small
employers to encourage them to extend coverage
to those not currently covered;
Permit tax-exempt institutions and state and
local governments to establish 401 (k) retirement
savings plans for their employees; and
--
Simplify the rules for administering 401(k)
plans and repealing special tax breaks that
discourage retirement savings.
SMALL BUSINESS TAX INITIATIVES
Small businesses are the engine of growth in our economy, creating two-thirds of new U.S. jobs.
During the 1980s, small businesses added about 12.5 million additional workers, while
employment in Fortune 500 companies actually declined. From 1988 to 1990, small businesses
created more than 3 million jobs--the entire net increase in the nation's job growth for that
period in the private, nonfarm sector.
This progress in job creation by small business is held back by three impediments--a high cost
of capital, a paperwork burden brought on by unnecessary regulation, and high costs of
providing employee benefits. The Bush Administration is addressing these impediments in a set
of specific tax policy changes. These changes complement the Administration's efforts in other
areas to assist small businesses.
Reducing the Cost of Capital
Increase section 179 limit on the cost of equipment that can be expensed from $10,000
to $25,000 (revenue cost: $8.4 billion over 5 years).
Exempt tax preferences attributable to depreciation, depletion, intangible drilling costs,
and certain other expenses from the AMT for small business corporations and individual
taxpayers who actively participate in small business activities (revenue cost: $1.7 billion
over 5 years).
Exempt up to 100 percent of capital gains on small business stock, and 100 percent of
the gain if the proceeds are rolled over into another small business investment (revenue
cost: $0.7 billion over 5 years).
Reduce the lowest corporate tax rate from 15 percent to 10 percent (revenue cost: $5.5
billion over 5 years).
Eliminating Unnecessary Paperwork and Regulation
Allow expensing of the first $2,500 of small business startup costs with the balance
written off over 5 years (revenue cost: $0.5 billion over 5 years).
Allow small businesses to elect a new inflation-adjusted FIFO inventory accounting rule
(revenue cost: $2.6 billion over 5 years).
Exempt small business from the uniform capitalization and long-term contract accounting
rules (revenue cost: $0.3 billion over 5 years).
Allow small businesses to establish a small business model pension plan. This plan will
allow employees to defer up to $3,000 in contributions if the employer matches a portion
-2-
of their contribution. In addition, certain other pension simplifications will apply to
small businesses (revenue cost: $0.9 billion over 5 years).
Reducing the High Cost of Employee Benefits
Allow a deduction of 100 percent of health insurance premiums for self-employed
individuals (revenue cost: $5.0 billion over 5 years).
Provide a tax credit for small businesses that maintain a job and benefits for employees
on unpaid leave for childbirth or family illness (revenue cost: $3.1 billion over 5 years).
Effects of Proposals
These proposals will have a significant effect on the lives of small business owners and their
employees. Reductions in the cost of capital for small businesses will increase their ability to
invest and grow. In addition, the reduction in the burden of unnecessary paperwork will redirect
small business' resources away from form creation to product and job creation. For example,
the new small business tax proposals will:
Reduce the cost of capital and increase the cash flow of more than 4.8 million small
businesses by a total of about $2 billion each year by liberalizing expensing.
Reduce the cost of capital and increase the cash flow of 850,000 small corporations by
more than $1 billion each year by reducing their corporate tax liability.
Decrease unproductive recordkeeping and tax return preparation time by small businesses
across our country of over 160 million hours each year.
Reduce the regulatory burden for small businesses by eliminating 225 pages of regulatory
guidance from consideration in determining their tax liabilities.
Permit 950,000 small businesses to benefit directly from the $2,500 startup cost
expensing allowance (this represents 5.5 percent of all small businesses).
Eliminate depreciation computations and permit direct expensing through corporate tax
for all new equipment acquisitions by 4.8 million small businesses (this represents 26
percent of all small business).
Entitle 5 million small businesses to index inventories under a simplified method to
eliminate permanently the effects of inflation from their computations of gross income
from the sales of their products (this represents 28 percent of all small businesses).
-3-
Relieve 2 million small businesses from time-consuming cost allocation and capitalization
requirements, which differ from their financial reporting requirements, done solely for
purposes of determining their tax liabilities (this represents 11.5 percent of all small
businesses).
Relieve 150,000 small business owners and 10,000 small corporations from costly
recordkeeping and filing requirements caused by the alternative minimum tax.
Expand opportunities for small businesses to adopt qualified pension plans through
promoting the use of master and model small business plans, thus reducing the
professional fees that small businesses incur in establishing these plans, the filing fees
associated with adopting the plans, the administrative costs of implementing and
maintaining the plans, and the annual filing requirements for the plans.
-2-
of their contribution. In addition, certain other pension simplifications will apply to
small businesses (revenue cost: $0.9 billion over 5 years).
Reducing the High Cost of Employee Benefits
Allow a deduction of 100 percent of health insurance premiums for self-employed
individuals (revenue cost: $5.0 billion over 5 years).
Provide a tax credit for small businesses that maintain a job and benefits for employees
on unpaid leave for childbirth or family illness (revenue cost: $3.1 billion over 5 years).
Effects of Proposals
These proposals will have a significant effect on the lives of small business owners and their
employees. Reductions in the cost of capital for small businesses will increase their ability to
invest and grow. In addition, the reduction in the burden of unnecessary paperwork will redirect
small business' resources away from form creation to product and job creation. For example,
the new small business tax proposals will:
Reduce the cost of capital and increase the cash flow of more than 4.8 million small
businesses by a total of about $2 billion each year by liberalizing expensing.
Reduce the cost of capital and increase the cash flow of 850,000 small corporations by
more than $1 billion each year by reducing their corporate tax liability.
Decrease unproductive recordkeeping and tax return preparation time by small businesses
across our country of over 160 million hours each year.
Reduce the regulatory burden for small businesses by eliminating 225 pages of regulatory
guidance from consideration in determining their tax liabilities.
Permit 950,000 small businesses to benefit directly from the $2,500 startup cost
expensing allowance (this represents 5.5 percent of all small businesses).
Eliminate depreciation computations and permit direct expensing through corporate tax
for all new equipment acquisitions by 4.8 million small businesses (this represents 26
percent of all small business).
Entitle 5 million small businesses to index inventories under a simplified method to
eliminate permanently the effects of inflation from their computations of gross income
from the sales of their products (this represents 28 percent of all small businesses).
SMALL BUSINESS TAX INITIATIVES
Small businesses are the engine of growth in our economy, creating two-thirds of new U.S. jobs.
During the 1980s, small businesses added about 12.5 million additional workers, while
employment in Fortune 500 companies actually declined. From 1988 to 1990, small businesses
created more than 3 million jobs--the entire net increase in the nation's job growth for that
period in the private, nonfarm sector.
This progress in job creation by small business is held back by three impediments--a high cost
of capital, a paperwork burden brought on by unnecessary regulation, and high costs of
providing employee benefits. The Bush Administration is addressing these impediments in a set
of specific tax policy changes. These changes complement the Administration's efforts in other
areas to assist small businesses.
Reducing the Cost of Capital
Increase section 179 limit on the cost of equipment that can be expensed from $10,000
to $25,000 (revenue cost: $8.4 billion over 5 years).
Exempt tax preferences attributable to depreciation, depletion, intangible drilling costs,
and certain other expenses from the AMT for small business corporations and individual
taxpayers who actively participate in small business activities (revenue cost: $1.7 billion
over 5 years).
Exempt up to 100 percent of capital gains on small business stock, and 100 percent of
the gain if the proceeds are rolled over into another small business investment (revenue
cost: $0.7 billion over 5 years).
Reduce the lowest corporate tax rate from 15 percent to 10 percent (revenue cost: $5.5
billion over 5 years).
Eliminating Unnecessary Paperwork and Regulation
Allow expensing of the first $2,500 of small business startup costs with the balance
written off over 5 years (revenue cost: $0.5 billion over 5 years).
Allow small businesses to elect a new inflation-adjusted FIFO inventory accounting rule
(revenue cost: $2.6 billion over 5 years).
Exempt small business from the uniform capitalization and long-term contract accounting
rules (revenue cost: $0.3 billion over 5 years).
Allow small businesses to establish a small business model pension plan. This plan will
allow employees to defer up to $3,000 in contributions if the employer matches a portion
SEP '92' 17:53 ADMIN OFF ICE OFC
P.2%
92-
DRAFT
Immediate
D.J. Caulfield
202-205-6742
SBA STREAMLINES MINORITY PROGRAM, EASES ENTRY. CONTRACT PROCESS
WASHINGTON -- As part of President Bush's plan for overall
government deregulation, Administrator Patricia Saiki of the U.S.
Small Business Administration (SBA) today announced plans to
streamline the agency's Minority Small Business (MSB) program to
increase efficiency and broaden participation.
"This business development program, targeted to minorities,
must be more inclusive and it must deliver its services in a more
timely fashion, " said Saiki.
The reorganization, which requires some Congressional
approval, will ease eligibility and procurement regulations,
increase federal contracting opportunities and target delivery of
SBA business development services.
Saiki unveiled the proposal at a briefing also attended by
Judith Watts, associate administrator for the Office or Minority
Small Business and Capital Ownership Development (MSB&COD). This
office directs the agency's key minority-oriented commercial
initiatives, the 8 (a) business development program and 7(d)
management and technical assistance program.
Once the plan is approved, new B (a) applicants will notice
an immediate improvement from a more flexible and realistic
eligibility standard, a move intended to boost enrollment far
beyond today's level of slightly more than 4,000 firms. An
individual firm's success from that point on largely will be
decided by its own abilities and resources, coupled with business
development assistance provided by the SBA.
SEP 21 '92 17:54 ADMIN OFFICE ) OFC
P.3/33
DRAFT
The SEA's participation in the awarding of federal contracts
will also be affected.
"Now," said Saiki, "all 8 (a) contracts involve the SBA
administratively, a disincentive to federal buyers looking to
negotiate quickly and directly. The new procedures will remove
the SBA from this administrative role, simplifying the process
and encouraging wider use of 8 (a) throughout the federal system."
The creation of a federal government-wide small
disadvantaged business (SDB) procurement program with mandated
goals will bring about new, expanded contracting opportunities.
In conjunction with this expansion in marketplace, the SBA
proposes to do away with the requirement that 8 (a) contracts
exceeding a $3 million threshold ($5 million for manufacturing)
be competed among 8 (a) firms. The agency sees this as limiting
the 8 (a) company's opportunity to gain valuable experience
competing in this newly-created market.
Other recommendations include:
Establishing a pilot 8 (a) graduate assistance program
whereby firms that left the program and now compete
successfully in the economic mainstream mentor current
8 (a) participants;
Targeting 7(j) management and technical assistance to
8 (a) firms in four specific areas, marketing
assistance, proposal preparation, accounting systems
and industry specific technical expertise; and
Replacing the two stages of 8 (a) participation (a four-
year development and five-year [maximum] transition
phase) with only one level and offer all program
benefits to all participants throughout the nine-year
term.
###
DAN,
FYI
FACTS ABOUT U.S. SMALL BUSINESS
Todd
B
Small businesses are the engine that propels the economy.
Small businesses (i.e, less than 500 employees) today employ
more than 50 percent of the U.S. work force, account for 44
percent of all sales, generate 39 percent of the GNP, comprise 99
percent of all businesses in the U.S. and have been responsible
for over half (55 percent) of the country's technical and
industrial innovations since the second World War.
Small business fueled the rapid expansion in job creation.
Small businesses create two of every three jobs in the
economy.
During the 1980s, small businesses added about 12.5 million
additional workers, while the Fortune 500 companies'
employment actually declined by a total of 3.1 million jobs.
Over one-tenth (13 percent) of the labor force -- 15.6
million workers -: are self-employed (that includes part-
time self-employment).
From 1988 to 1990, small businesses created more than 3
million jobs -- the entire net increase in the nation's job
growth for that period in the private, non-farm sector.
The SBA estimates that 71 percent of future employment in
the fastest growing industries (e.g., medical care, business
services and the environment) is likely to come from small
businesses.
Small businesses are the catalyst for innovation -- the driving
force of a dynamic economy.
Much of the innovation in this country comes from small
businesses. Small firms produce about 2.4 times as many
innovations per employee as large firms.
Small businesses will enable the U.S. to become an export
superpower.
Forty percent of all U.S. exporters are small businesses.
Every billion dollars in exports creates 26,000 new jobs.
Small businesses play an important role in our Nations
manufacturing sector.
In 1991, 98 percent of all manufacturing firms were small
businesses -- 83 percent of all manufacturing firms employed
less than 50 workers.
Last year, 63 percent of all manufacturing jobs were located
in small businesses -- close to one in every five (18
percent) manufacturing jobs were in firms that employed less
than 50 workers.
Between 1985 and 1991, small manufacturers (less than 100
workers) created over 200,000 net new jobs.
Minorities and women have been the principal
beneficiaries/participants in the growth of small businesses.
Small business provides the best opportunity for economic
empowerment to this country's fastest-growing and most dynamic
groups -- minorities and women.
Blacks:
During the 1980s, the number of Black-owned businesses grew
by almost 40 percent, from just over 300,000 to 424,000.
The number of Black-owned manufacturing businesses more than
doubled form 1982 to 1987, from 3,707 to 8,004.
Hispanics:
The most recent Census Bureau statistics show more than
422,000 Hispanic-owned businesses nationally, an increase of
81 percent from 1982.
The number of Hispanic-owned businesses rose 80.5 percent
from 1982 to 1987. This rate of growth is almost six times
the rate for all businesses (14 percent), from 233,975 in
1982 to 422,373 in 1987.
Asians:
Between 1982 and 1987, the number of businesses owned by
Asian Americans and Pacific Islanders rose 89.3 percent.
The number of businesses owned by Vietnamese Americans
increased more than five-fold from 1982 to 1987, from 4,989
to 25,671.
Women:
Women are starting businesses at twice the rate of men.
30 percent of all small businesses in the U.S. are women-
owned. If the trend continues, nearly 48 percent of all
small businesses will by women-owned by the turn of the
century
The total number of businesses owned by women increased
about 58 percent from 1982 to 1987. This rate of growth is
more than four times the rate for all businesses (14
percent).
Women-owned businesses continue to demonstrate their growing
importance as providers of jobs for American workers.
Between 1982 and 1987, the number of women-owned businesses
with paid employees nearly doubled. As of 1987, women-
owned businesses employed over three million workers.
CREDIT AVAILABILITY AND SMALL BUSINESS
Working To Reverse the Credit Crunch
The Administration has worked with bank regulators and has
conducted extensive meetings with bankers, examiners, and
borrowers all over the U.S. to increase the availability of
funds.
--
This week Treasury Secretary Brady met with bank CEO's
to urge them to act more like bankers and open up their
lending windows to sound borrowers.
--
The Administration has called for banks to do "more
lending and less investing in government securities."
The Administration has worked with bank regulators to issue
over 30 regulatory changes in order to increase credit
availability:
--
President Bush has directed that bank examiners conduct
their valuation of real estate based on the ability to
generate income, not on liquidation value.
:
President Bush has taken action to end over-zealous
bank examinations.
Opening Up Equity Markets to Small Businesses
The President's Regulatory Relief Effort led to a series of
small business initiatives implemented by the Securities and
Exchange Commission:
--
allowing issuers of "seed capital" offerings to issue
up to $1 million per year in securities and be exempt
from SEC registration requirements.
--
raising from $1.5 million to $5 million the ceiling on
Regulation A limited public offerings, using simplified
disclosure procedures.
:
providing new simplified reporting systems and firms
for initial public offerings (IPOs), as well as for
repeat offerings of small companies.
--
fostering investment by mutual funds in small
businesses by: (a) increasing the amount of securities
that may be raised without registration by certain
types of investment companies specializing in small
businesses and (b) permitting mutual funds to increase
the percentage of assets that may be invested in the
illiquid securities of small businesses.
SUGGESTED SPEECH INSERT ON CREDIT AVAILABILITY
.we need the entrepreneurial spark that small businesses provide. But entrepreneurs
can't do it alone. They need the credit to set up shop and then to expand. They don't look for
a handout -- just a chance to give a good return on investment.
I know that small businesses have had a tough time borrowing. We've been fighting
the credit crunch in every possible way. First, we urged the Federal Reserve Board to lower
interest rates. Then we met with nearly every bank regulator in the country, and told them
that banks must be able to lend to good borrowers. We made 30 separate regulatory changes
to remove federal barriers to sound lending. Government overregulation should not stand in
the way of creating new businesses and jobs.
We took the message to the banks as well. Just this week Secretary Brady met with
bank CEOs from around the country and urged them to do more lending and less investing in
government securities. Banks must live up to their responsibilities. Savings must be plowed
back into the community to create jobs.
Then we took the message to Wall Street. Working with the SEC, we made it easier
for small companies to sell shares by eliminating the paperwork requirements that drive up the
cost of getting investors to buy into your dream.
Churchill once said to America, "Give us the tools and we will finish the job." This is
the cry of entrepreneurs. We hear your voice. And every day we're pushing aside the barriers
that stand in the way of building your business.
Regulardin.
Rec 'd 900AM
9/22/92
Encouraging Entrepreneurial, Capitalism:
Strengthening Small Business
I. Introduction: The Challenge
Historians will record the twentieth century as the
American Century. It was in this century that the United
States first became actively engaged around the world.
Throughout this century, we have sought to advance two ideals -
- democracy and free enterprise -- that have served us well for
more than two hundred years.
Today, in country after country, given the choice, people
have chosen these two ideals as the path they want to pursue.
We have just completed the greatest mission of this American
century -- the triumph of democratic capitalism over imperial
communism.
Despite these victories in the marketplace of ideas, many
Americans are anxious about the future. Sluggish economic
growth in the United States, Europe, and Japan has fueled many
of these concerns.
We sense the epic changes at work in the world and in the
economy, the uneasiness felt in the democracies who have served
as our partners.
For America to be safe and strong, we must move
confidently to meet the defining challenge of the 1990s: to
win the economic competition in an integrated global economy,
and provide Americans with prosperity and economic security.
We must be a military superpower, an economic superpower, and
an export superpower.
My Agenda for American Renewal states that we need to look
forward -- to open new markets, prepare our people to work,
strengthen our families, save and invest so that we can win.
Our renewal depends on economic growth -- but growth not for
the few at the expense of the many, not for the present at the
expense of the future.
In our country we have always prized an entrepreneurial
capitalism that grows from the bottom up, not the top down; a
prosperity that begins on Main Street and extends to Wall
Street -- not the other way around.
One of our great strengths is our capacity to innovate, to
adjust, to change, to redeploy our resources to their most
efficient uses. The economic future will belong to those
nations most able to innovate and adapt. Those burdened by
bigness often sacrifice quickness and agility for size.
Entrepreneurial capitalism is the sparkplug for America's
economic engine. Its energy depends on creating a climate that
encourages creativity, rewards innovation, promotes
flexibility, and requires competition. Small businesses are
essential in helping America meet the challenge of an
integrated world economy.
II. The Context: The Role of Small Business in the Economy
Small business has long played an important role in the
U.S. economy. Small businesses, those businesses with fewer
than 500 employees, today employ more than 50 percent of the
U.S. work force.
They account for 44 percent of all sales and generate 39
percent of the GDP. Thirteen percent of our labor force --
15.6 million workers -- are self-employed.
Small businesses are a crucial element of our nation's
manufacturing sector. In 1991, 98 percent of all manufacturing
firms were small businesses.
Last year, 63 percent of all manufacturing jobs were
located in small businesses -- close to one in every five (18
percent) manufacturing jobs were in firms that employed less
than 50 workers. Between 1985 and 1991, small manufacturers
with less than 100 workers created over 200,000 net new jobs.
III. Recognizing Our Strengths
Small business is one of the strengths of the U.S.
economy. It contributes to our economic well being in four
important respects.
First, our success in creating jobs is in large part
attributable to the vitality of our small businesses. Small
business is the engine that propels the economy.
Small businesses create two-thirds of our new jobs.
During the 1980s, small businesses added about 12.5
million additional workers, while employment in
Fortune 500 companies actually declined.
From 1988 to 1990, small businesses created more than
3 million jobs -- the entire net increase in the
nation's job growth for that period in the private,
non-farm sector.
Second, small businesses are a catalyst for innovation --
the driving force in a dynamic economy. Small firms produce
about 2.4 times as many innovations per employee as large
firms. They have been responsible for over half (55 percent)
of the country's technical and industrial innovations since the
second World War.
Third, small businesses will enable the U.S. to become an
export superpower. Forty percent of all U.S. exporters are
small businesses. Every billion dollars in exports creates
20,000 new jobs.
Fourth, the dynamism of small business has provided an
avenue of advancement for minorities and women. During the
1980s, the number of Black-owned businesses grew by almost 40
percent, and the number of Black-owned manufacturing
establishments more than doubled from 1982 to 1987.
Likewise, the most recent Census bureau statistics show
more than 422,000 Hispanic-owned businesses nationally, an
increase of 81 percent from 1982. The rate of growth of
Hispanic-owned businesses is almost six times the rate for all
businesses. Between 1982 and 1987, the number of businesses
owned by Asian Americans and Pacific Islanders rose 89.3
percent.
Women are starting businesses at twice the rate of men.
Thirty percent of all small businesses in the U.S. are owned by
women. If the trend continues, nearly 48 percent of all small
businesses will be owned by women by the turn of the century.
IV. Helping Small Businesses Get Started
My Agenda for American Renewal encourages the
entrepreneurial spirit of our private businesses. It offers
pursue tax, economic and social policies that give incentives
for entrepreneurship, rather than discouraging it.
This is common sense. When government permits individuals
to keep the rewards of their success, they will keep trying
until they succeed. But when government exacts a higher price
for entrepreneurship, it undermines the incentive for
individuals to start new businesses and create jobs.
That is why I want to cut the capital gains tax and index
it for inflation. But in the case of small businesses, I
propose to go one step further and cut the tax on capital gains
from small business start-ups to zero. These changes would
permit small business owners to keep the economic rewards they
have earned in return for the risks they have taken, giving
them a greater incentive to undertake those risks.
Some potential entrepreneurs are deterred by the high
initial costs of starting a company. Under our tax laws, they
can only deduct those expenses over many years.
I propose changing the tax laws to allow individuals to
deduct up to $2,500 of those start-up costs in the first year,
when those costs hit small business owners the hardest. ($0.5
billion)
These economic incentives should help. But sometimes
direct financial assistance is required, particularly for those
who may be unable to obtain credit to start a business from
traditional financing institutions.
I recently signed legislation to reform the Small Business
Investment Company (SBIC) program. The legislation creates a
new $250 million program designed to provide equity-type
financing to small businesses with high growth potential.
Under the new program, SBICs will be better able to make equity
investments in small firms wanting to develop and market their
visionary ideas.
In order to fill that need, the Small Business
Administration started a $45 million program earlier this year
to provide unsecured short-term loans in small amounts -- up to
$25,000 -- to budding entrepreneurs or small businesses that
would like to expand.
Finally, my Administration is seeking new ways to help
those who might wish to start a small business. The Small
Business Administration and the Department of Housing and Urban
Development, working in partnership, recently agreed to start a
pilot program in Atlanta to assist public housing residents and
other low-income residents in the neighborhood to start their
own businesses.
Under the program, the SBA and HUD provide managerial,
technical and financial assistance to residents who are
interested in starting or expanding a business to provide
services for the housing project or its residents, including
maintenance and custodial services, appliance repairs, security
services, lawn care, child care or transportation services.
V.
Helping Small Businesses Get Access to Credit
Small businesses need adequate access to credit.
Entrepreneurs can't do it alone. They need credit to set up
shop and then to expand. They are not looking for a handout,
but a chance to give a good return on investment.
In 1992 we have provided a record $6 billion in loan
authority to permit the Small Business Administration to
guarantee small business loans. This is 50 percent above the
1991 level.
More than $2 billion in loan authority has been provided
this fiscal year to help small businesses recover from the
effects of devastating natural disasters including Hurricanes
Andrew and Iniki and the Los Angeles riots. The Small Business
Administration has initiated steps to streamline the
application process SO that businesses are able to get back on
their feet again without delay.
I know that many small businesses have had a tough time
borrowing. We have been fighting the credit crunch in every
possible way. First, we worked with the Federal Reserve Board
to lower interest rates. Interest rates are now at their
lowest levels in twenty years.
Then we met with nearly every bank regulator in the
country, and told them that banks must be able to lend to good
borrowers. We made thirty separate regulatory changes to
remove federal barriers to sound lending. Government
overregulation should not stand in the way of creating new
businesses and jobs.
Earlier this year, I initiated the New England Lending and
Recovery Project in order to respond to severe credit crunch
problems in that area. Under this project, the Small Business
Administration has been working with the Federal Deposit
Insurance Corporation (FDIC) to review the performing loans in
their portfolio. The goal is to identify loans that could be
restructured or refinanced under the SBA's Section 7(a) loan
program, thus averting a possible foreclosure action on the
loan by the FDIC. This initiative has provided much needed
assistance to save small businesses and the workers they
employ.
We took the message to the banks as well. Last week
Secretary Brady met with bank CEOs from around the country to
discuss credit market conditions and to encourage a strong
focus on small business lending.
We have directed bank examiners to conduct their valuation
of real estate based on the ability to generate income, not on
its liquidation value.
Then we took the message to Wall Street. Working with
the Securities and Exchange Commission, we are making it easier
for small companies to sell shares by eliminating the paperwork
requirements that drive up the cost of getting investors.
First, issuers of "seed capital" offerings will be able to
issue up to $1 million annually in securities exempt from SEC
registration requirements.
Second, the SEC is raising from $1.5 million to $5 million
the maximum amount of securities that can be issued in a
limited public offering using simplified disclosure procedures.
Third, the SEC has expanded its shelf registration rules
to allow up to 450 additional small and medium sized companies
to register securities offerings only once every two years.
These steps could increase available investment capital by $1
trillion.
Finally, the SEC is adopting rules to foster investment in
small businesses by mutual funds.
VI. Helping Small Businesses Reduce the Cost of Capital
If small business is to accelerate its role as an engine
for creating jobs we must bring down the cost of capital by
reducing costly tax and regulatory burdens. Our task is two
fold: reduce capital costs directly and reduce the paperwork
burden that fall SO heavily on small businesses.
I am proposing a five-year $20 billion initiative to
achieve these two objectives. This initiative includes:
Reducing the corporate tax rate for small businesses
from 15 percent to 10 percent; ($5.5 billion)
Increasing the current expensing limit from $10,000
to $25,000; ($8.4 billion)
Eliminating capital gains taxes on newly issued small
business stock; ($0.7 billion)
Permitting the immediate write-off of up to $2,500 of
the front end costs of organizing a new business;
($0.5 billion) and
Simplifying the tax laws so that most small
businesses can file their returns on one or two
pages. ($4.9 billion)
This simplification will grant Alternative Minimum
Tax relief for preferences arising from active
participation in a small business; allow small
businesses to elect inflation-adjusted inventory
accounting rules; exempt small businesses from
uniform capitalization and long-term contract rules;
and enhance and simplify pension rules for small
businesses.
Winston Churchill once said to America: "Give us the tools
and we will finish the job." This is the cry of entrepreneurs.
We hear your voice. Every day we are pushing aside the
barriers that stand in the way of building your businesses and
creating new jobs.
VII. Helping Small Businesses Expand Employment and Increase
Productivity
Small businesses today face a new competitive environment
-- challenged not only by competitors in their neighborhood,
their city and throughout the Nation, but also by competing
firms from around the world. In the new global economy, each
of our companies -- from the largest to the smallest -- must
have the tools they need not only to compete, but to win.
The ability of small businesses to grow and compete in the
global economy depends on their ability to innovate, increase
productivity, attract and retain highly-skilled workers and
find new markets for their products. The Federal government
can do its part by encouraging investment in R&D, supporting
efforts to improve the quality of our workforce, reforming our
legal system and opening foreign markets for American products
and services.
A. Supporting Innovative Research
In order to be the world's economic leader tomorrow, we
must invest in research and development and foster new
technologies today. That is why I want to make the research
and experimentation tax credit permanent. This credit, which
was adopted in 1981 to encourage increased private R&D
spending, has been renewed periodically for a year or two at a
time. It is time to create predictable rules small businesses
can count on when making R&D investment decisions by renewing
it permanently.
Our Small Business Innovation Research (SBIR) program
fosters the pioneering spirit of small businesses in research
and development activities. Under the SBIR program, eleven
major Federal agencies set aside a percentage of their R&D
funds for contracts with small firms.
My Administration strongly supports increasing the portion
of the Federal R&D budget set aside for small business from
1.25 percent to 2.5 percent. Congress should pass this
legislation immediately. Since the program began ten years
ago, more than $2.2 billion in Federal R&D funding has been
directed to small businesses.
One of the goals of the SBIR program is to encourage small
firms to develop products and technologies that have commercial
applications. At least one in four SBIR award winners has
achieved commercial sales or expects that commercial sales will
occur.
B.
Improving the Quality of Our Workforce
In the 21st century, our greatest national resource will
be our people. Materials, machines, and methods are also
important, but it is the American worker who will remain the
key to our economic security. Since the workplace of the 21st
century will be constantly changing, we need a workforce that
is skilled and adaptable.
Those industries showing the fastest rate of employment
growth include many small-business-dominated industries that
require highly-trained workers: engineering, biotechnology,
architectural, business and recreation services and automotive
repair. Those growing industries with a skilled workforce will
have an advantage in the new global marketplace.
That is what my American 2000 program is all about. It
includes four crucial elements:
Accountability.
Our students can't beat world class competition if they
can't meet world class standards. We are moving ahead
with the development of these standards in math, science,
English, history, geography, arts and civics. And we need
voluntary national achievement tests to measure the
progress of our students in meeting these standards.
Innovation.
We need break-the-mold New American Schools that will
transform our classrooms by developing and implementing
the latest in technology and ideas for teaching our
students.
Flexibility.
We need to give schools the flexibility to become
educational entrepreneurs --to figure out the best ways to
motivate our children, use technology, include parents and
involve new types of teachers.
Competition and Choice.
We must give parents the ability to choose which school
their children will attend -- public, private or
religious.
We must prepare workers for the prospect of changing jobs
and learning new skills many times throughout the course of a
productive life. In January 1992, I announced a plan to
streamline the Federal job training system through "one-stop
shopping" in every community. Experience has demonstrated that
the most effective training and placement services are those
closely developed with local employers through private industry
councils. That way the training is designed to develop skills
that employers know they will need.
My expanded job training proposal has three key features:
Universal coverage, SO all dislocated workers will
have access to basic transition assistance and
training support;
Skill grant vouchers of up to $3000 to help meet the
costs of adding new skills and training; and
A tripling of the resources currently devoted to
training and worker adjustment, an allocation of $10
billion over five years.
I have also proposed a specially-targeted Youth Skills
Initiative. The Initiative includes creation of a new Youth
Training Corps to provide economically and socially
disadvantaged young people with intensive vocational training,
and a National Youth Apprenticeship Program to provide skills
training for young people not planning to attend college.
C.
Reforming Our Legal System
America has suffered a civil litigation explosion. Over
the past 30 years, Federal lawsuits have almost tripled.
Instead of being fast, fair and affordable, our civil justice
system is slow, expensive, and putting us at a global
disadvantage.
The cost of litigation affects businesses of every size.
Long delays in resolving disputes waste valuable judicial
resources, force early settlement by those who cannot afford to
wait, discourage those who have meritorious suits, and
encourage frivolous suits by those who hope to leverage unjust
settlements. High punitive damage awards are passed on to
consumers through higher prices, job cuts, higher insurance
premiums, and fewer new products.
The major obstacle to reform is, simply put, trial
lawyers. I support product liability reform legislation to
confront the trial lawyers head on. It would stop wide
variation among states' product liability rules; stop important
products from being kept off the market; stop excessive
litigation costs with more money going to lawyers than to
injured consumers; cut excessive insurance rates; and end
excessive consumer costs.
My "Access to Justice Act of 1992" is intended to restore
fairness and efficiency to the nation's civil justice system
through: alternatives to Federal civil trials such as
alternative dispute resolution; incentives for pre-litigation
settlement, including pre-complaint notification; and a "loser
pays" rule requiring the loser to pay the winner's legal fees
in suits involving Federal diversity jurisdiction.
We also need to continue our work with the States to
encourage fundamental change at the State and local level.
D. Expanding and Opening Foreign Markets
America is an exporting nation. In 1991, 'we regained the
position of the world's number one exporter. Even more
impressive, a relatively small percentage of American firms are
responsible for most U.S. exports. Fifteen percent of U.S.
firms account for nearly 85 percent of U.S. exports.
Small American businesses represent an immense, largely
untapped source of export capacity. Today, small businesses
have begun to see the potential that lies in selling their
goods and services to eager markets abroad. My Administration
has been active in making that dream a reality.
Through the programs of the Small Business Administration
(SBA) and the Department of Commerce, we have provided
information, counseling, training and even financing to
thousands of small businesses who are dealing for the first
time with the challenges of the international marketplace.
The Department of Commerce has held over thirty
international trade conferences and seminars across the country
to work with small businesses, provide information they need to
market their products overseas, and identify U.S. government
programs and sources of financing that can help them get
started. In addition, the Commerce Department's Matchmaker
program has introduced hundreds of small businesses to foreign
markets, arranging for them to meet directly with potential
foreign buyers for their products.
The SBA has encouraged small businesses to take advantage
of its Export Revolving Line of Credit program. This special
pilot project provides a revolving working capital line of
credit to help small manufacturers bridge the gap between
receipt of orders for their goods and receipt of payment.
Export loans under the Line of Credit program jumped from $4.85
million in 1990 to over $26 million in 1991. In the first
three quarters of 1992, the SBA extended $28 million in loans
to small exporters under this program.
All SBA loans to exporters increased from $42 million in
1990 to $123 million in 1991, with an additional $195 million
in loans during the first three quarters of 1992.
Of course, it is the private sector that must lead the
charge in taking advantage of opportunities to market American
products abroad. But where government can help in opening
markets and making those first steps a little easier, we will
continue to do SO.
E. Creating Enterprise Zones
Our inner cities and rural areas suffer from a lack of
economic opportunities for their residents. In order to entice
individuals to establish small businesses in these areas, I
have proposed creating enterprise zones. Workers employed by
enterprises in the zone would be eligible for a tax credit on
wages. Inner city entrepreneurs starting businesses and small
investors who start or purchase businesses located in
enterprise zones would be entitled to deduct up to $50,000 on
their personal income taxes each year, and would not be taxed
on capital gains resulting from their investment.
These measures will promote entrepreneurship and job
creation in economically distressed urban and rural
communities.
VIII. Clearing Away the Regulatory Maze
If small businesses are to thrive and prosper, they must
be free to compete without the burden of unnecessary and
restrictive Federal regulation. We are working to create a
business environment in which regulations addressing legitimate
health and safety concerns are balanced with the need to
strengthen economic growth and job creation.
In my State of the Union Address last January, I
announced, and have since extended through August 28, 1993, a
regulatory reform initiative which places a moratorium on new
Federal regulations that stifle economic growth. I also
instructed Federal agencies to look for ways to modify existing
regulations that impose a special economic burden on small
business.
In addition, we have undertaken several reforms to reduce
the costs and burdens imposed on small businesses in complying
with the Federal tax system.
A. Reducing the Costs of the Payroll Tax System
Last May my Administration announced several initiatives
that will reduce administrative costs for the more than 3.5
million small employers who must report employment taxes.
Currently, many small employers must make payroll tax
deposits as often as twice a week, using paper coupons. This
time-consuming, inefficient system must be simplified. So we
propose to allow as many as 75 percent of all employers to
deposit payroll taxes once a month, and to make those deposits
electronically.
These simplifications will reduce substantially the costs
to employers, particularly small businesses, of complying with
payroll tax regulations. In addition, these changes are
expected to reduce payroll tax penalties by more than 20
percent.
The IRS is developing a new simplified employment tax form
that will eliminate information ordinarily relevant only to
large businesses. The IRS anticipates the new form will be
available by the first quarter of 1994.
It is also inefficient and unacceptable to expect
employers to file employment tax forms for each employee with
the IRS, the Social Security Administration, and State and
local tax agencies. So we are creating a new Single Wage
Reporting System that would require only a single filing,
thereby saving substantial administrative costs.
Finally, by 1993, the IRS plans to save employers from
needless paperwork and correspondence with the IRS by
permitting employers to verify employees' tax identification
numbers (such as a social security number) by telephone.
B. Reducing Other Tax-Related Burdens
We are also working to reduce the burdens on small
businesses in complying with other aspects of the Federal tax
system. The Internal Revenue Service is allowing sole
proprietors, including farmers, to deduct business-related tax
preparation fees as a business expense rather than as a limited
itemized deduction.
The IRS is also working with States on a pilot program for
the joint electronic filing of Federal and State tax returns.
To help small businesses deal with the complexities of the tax
system, the IRS has informally contacted over 150,000 small
businesses having difficulty complying with Federal tax deposit
requirements. The IRS is now working with these taxpayers,
outside the formal audit and enforcement context, to address
compliance concerns. In addition, during 1991 the IRS
conducted over 2,400 Small Business Tax Education Workshops and
seminars which were attended by more than 80,000 executives.
IX. Helping Small Businesses Provide for Their Workers
In order to attract and retain good workers, small
businesses need to be able to afford to provide the benefits
that will give their employees economic security. Three key
areas of concern to many workers are health benefits, family
leave policies and pension benefits.
A.
Affordable Health Care for Small Businesses and the
Self-Employed
Our current health care system provides high quality,
high-tech medicine, but at an unacceptable price: prices have
increased at a rate two to three times the rest of the economy;
thirty-five million Americans have no health insurance and
current practices leave workers fearful of changing jobs
because they may lose their health insurance.
My comprehensive program to reform our health care system
includes provisions that allow small businesses to reduce their
health insurance costs by pooling their purchasing power. By
joining together to form Health Insurance Networks, small
employers can have the same market clout and market
sophistication of the biggest players in the health care
marketplace. Group purchasing can reduce health insurance
costs by as much as 16 percent through economies of scale,
lower administrative costs and greater leverage to negotiate
better rates with insurers.
Small employers also face the possibility of skyrocketing
insurance premiums, or the inability to obtain any health
insurance at all, if even one employee or employee family
member is seriously ill. My plan guarantees insurability so
that people with "preexisting" illnesses cannot be denied a job
or health coverage on the job.
Our health care plan guarantees affordable coverage
through a two-phase process. In the short term, we will limit
the difference in premiums that an insurer may charge to groups
with different health risks, so that no employer has to pay
astronomical insurance premiums. In the next phase, we will
create risk pools both for small businesses and for individuals
and families receiving tax credits for health insurance.
Health plans insuring a sicker than average population would
receive a net transfer from the risk pool while other insurers
will be net payers into the pool.
My plan will also benefit the self-employed, permitting
them to deduct 100 percent of their health care insurance
premiums as opposed to the 25 percent they currently are
permitted to deduct. ($5.0 billion) This is fair and treats
them similarly to other businesses.
I believe we can provide access to affordable health care
for all Americans, while preserving choice for patients and
their families in selecting doctors, hospitals, health care
programs, and employment. My approach relies on the private
sector to deliver health care services. But I would make the
market work for us by enhancing competition, which will cut
costs.
B. Incentives for Family Leave Policies
A growing number of families have two wage-earners or are
headed by a single parent. As a result, it is more difficult
for individuals to balance the demands of their job with the
need to care for a seriously ill or injured family member, or
to take time off to have a child or adopt one.
Employers may face significant costs from lost production,
lost business opportunities, or other costs as the result of
extended employee absences. These costs are particularly high
for small and medium businesses that may not be able easily to
shift employees to cover for the absent worker or to hire a
temporary replacement. These smaller companies are also more
likely to experience severe economic consequences if they do
not quickly replace absent workers.
Since employers frequently must place limits on employee
absences due to the economic costs of providing leave, some
employees find themselves faced with choosing between their
employment and the serious medical or personal needs of their
families.
I propose to provide tax incentives to encourage
businesses that employ fewer than 500 employees to adopt
flexible leave policies related to childbirth, adoptión or
serious family health problems. Small employers who provide
family leave to their employees would be eligible for a
refundable tax credit of 20 percent of compensation to the
employee during the period of family leave, up to a maximum of
$100 a day in wages and benefits. The maximum credit per
employee would be $1,200 per year. The employer must continue
to provide health benefits and other employment protection and
benefits to employees on family leave and must provide leave on
a nondiscriminatory basis. ($3.1 billion)
My approach helps our smallest businesses provide family
leave. This is the group of workers who most need the help.
In contrast, the bill supported by many in Congress would only
affect employees in businesses with more than fifty employees.
C. Retirement Security
Many Americans rely on their pension to provide them with
a secure source of income during their retirement years. But
many employees of small businesses are not so fortunate. Only
24 percent of small firm employees have pension coverage; the
rest -- some 26 million individuals -- have no pension at all.
Even those employees with pensions often lose accrued
benefits as retirement income when they change jobs prior to
retirement age. Current law gives workers the incentive to
cash in their benefits -- get a lump-sum payment -- rather than
to roll the money over into another retirement plan or an IRA.
I am determined to turn those incentives around -- to make
it easy for workers to take the pension benefits they have
earned in one job to the next. Earlier this year, I was proud
to sign into law a bill that makes pensions portable. It
permits workers to transfer their accrued pension benefits from
their old job directly to an IRA or their new employer's
pension plan, if that plan accepts transfers.
The new law also imposes a 20 percent mandatory
withholding penalty on lump-sum payments of pension benefits
that are not transferred directly to a new retirement account.
By encouraging preservation of retirement savings, we can
ensure a more secure future for working men and women.
I also want to help the millions of employees without
pensions by creating a new, simplified retirement program for
small businesses, and by allowing State and local governments
and tax-exempt organizations to establish 401(k) retirement
plans. At the same time, we will simplify the rules for
administering retirement plans. By reducing administrative
costs, more small companies and organizations will be able to
afford to provide pensions for their employees.
X.
Two Paths
We stand at a crossroads where two paths diverge in
markedly different directions. They represent competing
conceptions of the course our country should pursue.
Taxes
Our path promises to strengthen America's small businesses
through reducing the burden of taxes in order to stimulate
investment, research and development, and economic activity.
It would increase expensing for investments in equipment, help
businesses get started, and reduce capital gains to encourage
risk-taking.
My opponent's path relies on substantial increases in
taxes on small business -- taxes on so-called "high income"
individuals, three quarters of whom have income from small
business activity or family farms; payroll taxes to pay for
health care; requiring employers to spent 1.5 percent of
payroll for training -- all of which would drain profits,
reduce investment, and restrain the growth of jobs.
Regulatory Burden
Our path promises a comprehensive program to simplify and
ease the burden of regulations on small businesses and to
eliminate those that are unnecessary. It would modify existing
regulations that impose a special economic burden on small
business while fending off expensive new mandates. It would
reform our product liability laws and civil justice system to
reduce the cost of insurance to small businesses and the hidden
tax of needless litigation.
My opponent's path relies on government mandates and
regulations as the appropriate means for extensive government
intervention in the economy and accepts our current
liability laws and civil justice system as an inevitable cost
of doing business in America.
Health Care
Our path promises to assist those who work for small
businesses by helping these businesses secure access to
affordable health insurance, by permitting the self-employed to
deduct the health insurance premiums they pay as other
businesses do, and by providing credits and deductions for
those who need it in order to purchase affordable health
insurance.
My opponent's path relies on a mandated pay-or-play health
care scheme that effectively amounts to a doubling of the
payroll tax for most small businesses and that would quickly
cascade into ever more government-provided health care.
Family Leave
Our path promises to expand family leave to small
businesses by providing tax credits to offset the costs of
family and medical leave, while leaving decision making to
employers and employees.
My opponent's path relies on a government mandate that
sets inflexible leave requirements for companies with more than
50 employees, excludes employees of the smallest businesses,
and imposes a hidden tax on employees of medium-sized
businesses.
Access to Credit
Our path promises a concerted effort to keep interest
rates low and to facilitate the flow of credit to small
businesses. It would reduce the cost of capital to small
businesses so that they can make needed investments to expand
their capacity and increase their productivity.
My opponent's path relies on government direction of
additional resources to make investments in selected
industries.
Worker Training
Our path promises to revolutionize education and job
training while providing worker adjustment assistance for all
dislocated workers.
My opponent's path would mandate worker training while
imposing what amounts to a 1.5 percent payroll tax on small
business.
We face a choice between change that trusts people and
change that relies on greater government intervention in
managing and directing economic activity and resources. By
choosing our path that trusts people, we can reach our goal of
a $10 trillion economy by the first years of the 21st Century.
We can succeed as an economic and export superpower. We can
win the economic competition. We can renew our nation for the
next American century.
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R.Porth
DRAFT
Encouraging Entrepreneurial Capitalism:
Strengthening Small Business
I. Introduction: The Challenge
Historians will record the twentieth century as the
American Century. It was in this century that the United
States first became actively engaged around the world.
Throughout this century, we have sought to advance two ideals
that have served us well for more than two hundred years.
Today, in country after country, given the choice, people
have chosen these two ideals -- democracy and free enterprise -
- as the path they want to pursue. We have just completed the
grantest mission in the lifetime of our country -- the triumph
of democratic capitalism over imperial communism.
Despite these victories in the marketplace of ideas, man;
Americans are anxious about the future. Sluggish economic
growth in the United States, Europe, and in Japan has fueled
many of these concerns.
We sense the epic changes at work in the world and in the
economy, the uneasiness felt in the democracies who have serv
as our partners.
Fo' america to be safe and strong, we must move
confidently to meet the defining challenge of the 1990
in the economic comperition in an integrated global i:
and provide Americans with prosperity and economic secur
we must be a military superpower, an economic superpower, and
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an export superpower.
My agenda fox renewal asks that we look forward -- to cp-
new markets, prepare OUT people to work, strengthen our
save and invest so that we can win. Our renewal
mus or economic growth but growth not for the few 80
of the many, not for the present at the expense of the
future.
untry we have always prized 87 entrepreneurial
st. grows from the bottom up, not the top down; a
PLO-
at begins on Main Street and extends to Wall
Street
the other way around.
One of our great strengths is our capacity to innovate, to
adjust, to change, to redeploy our resources to their most
efficient uses. The economic future will belong to those
nations most able to
cvate and adapt. Those burdens by
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PG.08
bigness often sacrifice quickness and agility for size.
Entrepreneurial capitalism involves creating a climate
that encourages creativity, rewards innovation, promotes
flexibility, and requires competition. Small businesses must
play a crucial part in America meeting the challenge of an
integrated world economy.
II. The Context: Role of Small Business in the Economy
Small business has long played an important role in the
U.S. economy. Small businesses, those businesses with fewer
than 500 employees, today employ more than 50 percent of the
U.S. work force.
They account for 44 percent of all sales and generate 39
percent of the GDP. Thirteen percent of our labor force --
15.6 million workers -- are self-employed.
Small businesses are a crucial element of our nation's
manufacturing sector. In 1991, 98 percent of all manufacturing
firms were small businesses -- 83 percent of all manufacturing
mFg.
firms employed fewer than 50 workers.
Last year, 63 percent of all manufacturing jobs were
located in small businesses -- close to one in every five (18
percent) manufacturing jobs were in firms that employed less
than 50 workers. Between 1985 and 1991, small manufacturers
(less than 100 workers) created over 200,000 net new jobs.
III. Recognizing Our Strengths
Small business is one of the strengths of the U.S.
economy. They contribute to our economic well being in four
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important respects.
First, our success in creating jobs is in large part
attributable to the strength of our small businesses. Small
business is the engine that propels the economy.
Small businesses create two thirds of our new jobs.
During the 1980s small businesses added about 12.5
million additional workers, while employment in
Fortune 500 companies actually declined.
From 1988 to 1990, small businesses created more than
3 million jobs -- the entire net increase in the
NOT
nation's job growth for that period in the private,
non-farm sector.
Emplosize
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Second, small businesses are a catalyst for innovation --
the driving force in a dynamic economy. Small firms produce
about 2.4 times as many innovations per employee as large
firms. They have been responsible for over half (55 percent)
of the country's technical and industrial innovations since the
second World War.
Third, small businesses will enable the U.S. to become an
export superpower. Forty percent of all U.S. exporters are
small businesses. Every billion dollars in exports creates
20,000 new jobs.
Fourth, the dynamism of small business has provided an
avenue of advancement for minorities and women. During the
1980s, the number of Black-owned businesses grew by almost 40
percent, and the number of Black-owned manufacturing
establishments more than doubled from 1982 to 1987.
Likewise, the most recent Census bureau statistics show
more than 422,000 Hispanic-owned businesses nationally, an
increase of 81 percent from 1982. The rate of growth of
Hispanic-owned businesses is almost six times the rate for all
businesses. Between 1982 and 1987, the number of businesses
owned by Asian Americans and Pacific Islanders rose 89.3
percent.
Women are starting businesses at twice the rate of men.
30%-
Thirty percent of all small businesses in the U.S. are owned by
women. If the trend continues, nearly 48 percent of all small
to
businesses will be owned by women by the turn of the century.
IV. Helping Small Businesses Get Started
My Agenda for American Renewal calls for measures to
encourage the entrepreneurial spirit of our private businesses.
We must pursue tax, economic and social policies that give
incentives for entrepreneurship, rather than discouraging it.
This is common sense. When government permits individuals
to keep the rewards of their success, they will keep trying
until they succeed. But when government exacts a higher price
for entrepreneurship, it undermines the incentive for
individuals to start new businesses and create jobs.
That 13 why I want to cut the capital gains tax and index
it for inflation. But in the case of small businesses, I
G
propose to go one step further and cut the tax on capital gains
from small business start-ups to zero. These changes would
permit small bu ness owners to keep the economic rewards they
have earned in return for the risks they have taken, giving
them a greater incentive to undertake those risks.
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Some potential entrepreneurs are deterred by the high
initial costs of starting a company. Under our tax laws, they
can only deduct those expenses over many years. I propose
changing the tax laws to allow individuals to deduct up to
New
0
$2,500 of those start-up costs in the first year, when those
costs hit small business owners the hardest. ($0.5 billion)
These economic incentives should help. But sometimes
direct financial assistance is required, particularly for those
who may be unable to obtain credit to start a business from
traditional financing institutions.
In order to fill that need, the Small Business
Administration started a $15 million program earlier this year
undersay
to give unsecured loans in small amounts -- up to $25,000 -- to
budding entr preneurs or small businesses that would like to
expand.
Finally, my Administration is seeking new ways to help
those who might wish to start a small business. The Small
Business Administration and the Department of Housing and Urban
Development, working in partnership, recently agreed to start a
pilot program in Atlanta to assist public housing residents and
other low-income residents in the neighborhood to start their
own businesses.
Under the program, the SBA and HUD provide managerial,
technical and financial assistance to residents who are
interested in starting or expanding a business to provide
services for the housing project or its residents, including
maintenance and custodial services, appliance repairs, security
services, lawn care, child care or transportation services.
V.
Helping Small Businesses Get Access to Credit and Reduce
the Cost of Capital
Small-businesses need adequate access to credit.
Entrepreneurs can't do it alone. They need credit to set up
shop and then to expand. They are not looking for a handout,
but a chance to give a good return on investment.
year we have authorized a recor $6 billion in loan
to permit the Small Business Ac stration to
guarantee small business loans. This is
capical
ercent above the
1991 level.
I know that many small businesses have ha 7 tough time
borrowing. We have been fighting credit crunch in every
possible way. First, we worked with the Federal Reserve Board
to lower interest rates. Then we met with nearly every bank
regulator in the country, and told them that banks must be able
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to lend to good borrowers. We made thirty separate regulatory
changes to remove federal barriers to sound lending.
Government overregulation should not stand in the way of
creating new businesses and jobs.
We took the message to the banks as well. Last week
Secretary Brady met with bank CEOs from around the country and
urged them to do more lending and less investing in government
securities. E nks must live up to their responsibilities.
Savings must be plowed back into the community to create jobs.
We have directed bank examiners to conduct their valuation
of real estate based on the ability to generate income, not on
its liquidation value.
Then we took the message to Wall Street. Working with
the Securities and Exchange Commission, we made it easier for
small companies to sell shares by eliminating the paperwork
requirements that drive up the cost of getting investors.
Winston Churchill once said to America: "Give us the tools
and we will finish the job." This is the cry of entrepreneurs.
We hear your voice. Every day we are pushing aside the
barriers that stand in the way of building your business.
If small business is to accelerate its role as an engine
for creating jobs we must bring down the cost of capital by
reducing costly tax and regulatory burdens. Our task is two
fold: reduce capital costs directly and reduce the paperwork
burden that fall SO heavily on small businesses.
I am proposing a five-year $20 billion initiative to
reduce the cost of capital for our small businesses. This
initiative includes six elements:
N.W
Reducing the corporate tax rate for small
businesses from 15 percent to 10 percent. ($5.5
billion)
Increasing the current expensing limit from $10,000
to $25,000; ($8.4 billion)
Granting Alternative Minimum Tax relief for
preferences arising from active participation in a
small business; ($1.7 billion)
Eliminating capital gains taxes on newly issued small
business stock; ($0.7 billion)
Allowing small businesses to elect inflation-adjusted
inventory accounting rules; ($2.6 billion)
Exempting small business from uniform capitalization
and long-term contract rules. ($0.3 billion)
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Z-points
Enhancing and simplifying pension rules for small
business. ($0.9 billion)
VI. Helping Small Busin sses Expand Employment and Increase
Productivity
NOT
down the block-
anound the world
Di
Small businesses today face a new competitive environment
challenged not only by competitors in their neighborhood,
their city and throughout the Nation, but also by competing
firms from around the world. In the new global economy, each
of our companies -- from the largest to the smallest -- must
have the tools they need not only to compete, but to win.
The ability of small businesses to grow and compete in the
global economy depends on their ability to innovate, increase
productivity, attract and retain highly-skilled workers and
find new markets for their products. The Federal government
can do its part by encouraging investment in R&D, supporting
efforts to improve the quality of our workforce, reforming our
legal system and opening foreign markets for American products
and services.
A. Supporting Innovative Research
In order to be the world's economic leader tomorrow, we
must invest in research and development and foster new
technologies today. That is why I want to make the research
and experimentation tax credit permanent. This credit, which
was adopted in 1981 to encourage increased private R&D
spending, has been renewed periodically for a year or two at a
time. It is time to create predictable rules small businesses
can count on when making R&D investment decisions by renewing
it permanently.
Our Small Business Innovation Research (SBIR) program
fosters the pioneering sp'rit of small businesses in research
and development activities Under the SBIR program, eleven
major Federal agencies set aside a percentage of their R&D
funds for contracts with small firms.
Under my Administration, the portion of the Federal R&D
budget set aside for small business has doubled from 1.25
percent to 2.5 percent. Since the program began ten years ago,
more than $2.2 billion in Federal R&D funding has been directed
to small businesses.
One of the goals of T = SBIR program is to encourage small
firms to develop produc' and technologies that have commercial
applications. At least one in four SBIR award winners has
achieved commercial sales or expects that commercial sales will
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access to basic transition assistance and training support; (2)
skill grant vouchers of up to $3000 to help meet the costs of
adding new skills and training; and (3) a tripling of the
resources currently devoted to training and worker adjustment,
an allocation of $10 billion over five years.
I have also proposed a specially-targeted Youth Skills
Initiative. The Initiative includes creation of a new Youth
Training Corps to provide economically and socially
disadvantaged young people with intensive vocational training,
and a National Youth Apprenticeship Program to provide skills
training for young people not planning to attend college.
C. Reforming Our Legal System
America has suffered a civil litigation explosion. Over
the past 30 years, Federal lawsuits have almost tripled.
Instead of being fast, fair and affordable, our civil justice
system is slow, expensive, id putting us at a global
disadvantage.
The cost of litigation affects businesses of every size.
Long delays in resolving disputes waste valuable judicial
resources, force early settlement by those who cannot afford to
wait, discourage those who have meritorious suits, and
encourage frivolous suits by those who hope to leverage unjust
settlements. High punitive damage awards are passed on to
consumers through higher prices, job cuts, higher insurance,
and fewer new products.
My product liability reform legislation confronts the
trial lawyers head on. I want to stop wide variation among
states' product liability rules; stop important products from
being kept off the market; stop excessive litigation costs with
more money going to lawyers than to injured consumers; cut
excessive insurance rates; and end excessive consumer costs.
My "Access to Justice Act of 1992" is intended to restore
fairness and efficiency to the nation's civil justice system
through: alternatives to Federal civil trials such as
alternative dispute resolution; incentives for pre-litigation
settlement, including pre-complaint notification; and a "loser
pays" rule requiring the loser to pay the winner's legal fees
in suits involving Federal diversity jurisdiction.
We also need to continue our work with the States to
encourage fundamental change at the State and local level.
D. Expanding and Opening Foreign Markets
America is an exporting nation. In 1991, we regained the
position of the world's number one exporter. Even more
impressive, a relatively small percentage of American firms are
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occur.
B.
Improving the Quality of Our Workforce
In the 21st Century, our greatest national resource will
be our people. Materials, machines, and methods are also
important, but it is the American worker who will remain the
::ey to our economic security. Since the workplace of the 21st
Century will be constantly changing, we need a workforce that
is skilled and adaptable.
Those industries showing the fastest rate of growth in
employment in the decade between 1977-1987 included many small-
business-dominated industries that require highly-trained
workers: engineering, architectural, business and recreation
services and automotive repair. Those growing industries with
a skilled workforce will have an advantage in the new global
marketplace.
That is what my American 2000 program is all about. It
includes four crucial elements. The first is accountability.
Our students can't beat world class competition if they can't
meet world class standards. We are moving ahead with the
development of these standards in math, science, English,
history, geography, arts and civics. And we need voluntary
national achievement tests to measure the progress of our
students in meeting these standards.
The second is innovation. We need break-the-mold New
American Schools that will transform our clasrooms by
devel ping and implementing the latest in technology and ideas
for eaching our students.
The third is flexibility. We need to give schools the
flexibility to become educational entrepreneurs --to figure out
the best ways to motivate our children, use technology, include
parents and involve new types of teachers.
The fourth is competition and choice. We must give
parents the ability to choose which school their children will
attend -- public, private or religious.
We must prepare workers for the prospect of changing jobs
and learning new skills many times throughout the course of a
productive life. In January 1992, I announced a plan to
streamline the Federal job training system through "one-stop
shopping" in every community. Experience has demonstrated that
the most effective training and placement services are those
closely developed with local employers through private industry
councils. That way the training is designed to develop skills
that employers know they will need.
My expanded job training proposal has three key features:
(1) universal coverage, so all dislocated workers will have
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responsible for most U.S. exports. Fifteen percent of U.S.
firms account for nearly 85 percent of U.S. exports.
Small American businesses represent an immense, largely
untapped source of export capacity. Today, small businesses
have begun to see the potential that lies in selling their
goods and services to eager markets abroad. My Administration
has been active in making that dream a reality.
Through the programs of the Small Business Administration
(SBA) and the Department of Commerce, we have provided
information, counseling, training and even financing to
thousands of small businesses who are dealing for the first
time with the challenges of the international marketplace. The
Department of Commerce has held over thirty international trade
conferences and seminars across the country to work with small
businesses, to provide information they need to market their
products overseas, and to identify U.S. government programs and
sources of financing that can help them get started. In
addition, the Commerce Department's Matchmaker program has
introduced hundreds of small businesses to foreign markets,
arranging for them to meet directly with potential foreign
buyers for their products.
The SBA has encouraged small businesses to take advantage
of its Export Revolving Line of Credit program. This special
pilot project provides a revolving working capital line of
credit to help small manufacturers bridge the gap between
receipt of orders of their goods and receipt of payment.
Export loans under the Line of Credit program jumped from $4.85
million in 1990 to over $26 million in 1991. In the first
three quarters of 1992, the SBA extended $28 million in loans
to small exporters under this program.
All SBA loans to exporters increased from $42 million in
1990 to $123 million in 1991, with an additional $195 million
in loans during the first three quarters of 1992.
Of course, it is the private sector that must lead the
charge in taking advantage of opportunities to market American
products abroad, but where government can help in opening
markets and making those first steps a little easier we will
continue to do SO.
E. Creating Enterprise Zones
Our inner cities and rural areas suffer from a lack of
economic opportunities for their residents. In order to entice
individuals to establish small businesses in these areas, I
have proposed creating enterprise zones. Workers employed by
enterprises in the zone would be eligible for a tax credit on
wages. Inner city entrepreneurs starting businesses and small
investors who start or purchase businesses located in
enterprise zones would be entitled to deduct up to $50,000 on
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Simplify the Reporting of Federal Employment Taxes.
The IRS is developing a simplified new form, Form
941EZ, that is expected to reduce substantially the
compliance burdens of more than 3.5 million small
employers. The new form, which the IRS anticipates
will be available by the first quarter of 1994, will
eliminate information that is ordinarily relevant
only to large businesses.
The development of Form 941EZ follows other IRS
initiatives designed to simplify forms for small
businesses. In 1990, the IRS introduced a simplified
version of the form for reporting Federal
unemployment taxes. This new form is now used by
approximately 700,000 small employers at an estimated
annual savings of up to 10 million taxpayer hours.
Enable Employers to Deposit Payroll Taxes
Electronically. Last year, employers filed over 80
million paper coupons to accompany Federal payroll
tax deposits of almost $850 billion. The IRS is
testing a program to allow employers to make payroll
tax contributions directly to a designated Treasury
account. This experimental, voluntary program has
been made available to employers in South Carolina,
Florida and Atlanta, Georgia.
Establish a Single Wage Reporting System.
Traditionally, employers must file employment tax
forms for each employee with the IRS, the Social
Security Administration, and State and local tax
agencies. The IRS, Social Security Administration
and the Department of Labor recently agreed to
develop jointly a new Single Wage Reporting System.
The new system would require only one filing, thereby
saving substantial administrative costs. The Federal
agencies will work closely with State organizations
in refining and implementing this system.
Offer an On-Line Tax Identification Number Matching
Service. The IRS plans to establish a service to
allow employers to verify employees' tax
identification numbers (such as a social security
number) through a telephone call. This service will
eliminate an employer's need to engage in burdensome
paperwork and correspondence with the IRS. The IRS
anticipates that this program will be made available
to all employers in the 1993.
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their personal income taxes each year, and would not be taxed
on capital gains resulting from their investment.
These measures will promote entrepreneurship and job
creation in economically distressed urban and rural
communities.
VII. Clearing Away the Regulatory Maze
If small businesses are to thrive and prosper, they must
be free to compete without the burden of unnecessary and
restrictive Federal regulation. We are working to create a
business environment in which regulations addressing legitimate
health and safety concerns are balanced with the need to
strengthen economic growth and job creation.
In my State of the Union Address last January, I
announced, and have since extended through August 28, 1993, a
regulatory reform initiative which places a moratorium on new
Federal regulations that stifle economic growth. I also
instructed Federal agencies to look for ways to modify existing
regulations that impose a special economic burden on small
business.
In addition, we have undertaken several reforms to reduce
the costs and burdens imposed on small businesses in complying
with the Federal tax system.
A. Reducing the Costs of the Payroll Tax System
Last May my Administration announced several initiatives
that will reduce administrative costs for the more than five
million employers who must report employment taxes. The
reforms will:
Simplify the Payroll Tax Deposit System. The
Internal Revenue Service (IRS) and Department of the
Treasury will publish a proposed regulation that will
enable as many as 75 percent-of all employers to make
payroll tax deposits once-a-month, replacing the
current rules which require many employers to make
deposits as often as twice a week. Larger employers
can deposit payroll taxes on a fixed day of the week,
depending on the payroll date.
These simplifications will reduce substantially the
costs to employers, particularly small businesses, of
complying with payroll tax regulations. In addition,
these changes are expected to reduce payroll tax
penalties by more than 20 percent.
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B.
Reducing Other Tax-Related Burdens
are also working to reduce the burdens on small
businesses in complying with other aspects of the Federal tax
system. These reforms will allow:
Deductibility of Preparation Fees. On April 1, 1992,
the IRS released a ruling allowing more than 16
million sole proprietors, including farmers, to
deduct business-related tax preparation fees as a
business expense rather than as a limited itemized
deduction.
Joint Federal-State Filing. The IRS is working with
States on a pilot program for the joint electronic
filing of Federal and State tax returns. In 1992,
the IRS implemented this program an a State-wide
basis in South Carolina and on a more limited basis
in six other States. The IRS expects to add
additional States during the coming year.
Participation in Educational Initiatives for Small
Businesses. In the past year, the IRS has informally
contacted over 150,000 small businesses having
difficulty complying with Federal tax deposit
requirements. The IRS is now working with these
taxpayers, outside the formal audit and enforcement
context, to address compliance concerns. In
addition, during Fiscal Year 1991 the IRS conducted
over 2,400 Small Business Tax Education Workshops and
seminars which were attended by more than 80,000
executives.
VIII.
Helping Small Businesses Provide for Their Workers
In order to attract and retain good workers, small
businesses need to be able to afford to provide the benefits
that will give their employees economic security. Three key
areas of concern to many workers are health benefits, family
leave policies and pension benefits.
A.
Affordable Health Care for Small Businesses and the
Self-Employed
Our current health care system provides high quality,
high-tech medicine, but at an unacceptable price: spending has
increased at a rate two to three times the rest of the economy;
thirty-four million Americans have no health insurance and
millions more are afraid to change jobs for fear of losing
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their health insurance.
My comprehensive program to reform our health care system
includes provisions that encourage small businesses to reduce
their health insurance costs by pooling their purchasing power.
By joining together to form Health Insurance Networks, small
employers can have the same market clout and market
sophistication of the biggest players in the health care
marketplace. Group purchasing can reduce health insurance
costs by as much as 16 percent through economies of scale,
lower administrative costs and greater leverage to negotiate
better rates with insurers.
Small employers also face the possibility of skyrocketing
insurance premiums, or the inability to obtain any health
insurance at all, if even one employee is seriously ill. My
plan guarantees insurability so that people with "preexisting"
illnesses cannot be denied a job or health coverage on the job.
Our health care plan guarantees affordable coverage
through a two-phase process. In the short term, we will limit
the difference in premiums that an insurer may charge to groups
with different health risks, SO that no employer has to pay
astronomical insurance premiums. In the next phase, we will
create risk pools both for small businesses and for individuals
and families receiving tax credits for health insurance.
Health plans insuring a sicker than average population would
receive a net transfer from the risk pool wh: e other insurers
will be net payers into the pool.
My plan will also benefit the self-employed, permitting
them to deduct 100 percent of their health care insurance
premiums as opposed to the 25 percent they currently are
permitted to deduct. ($5.0 billion) This is fair and treats
them similarly to other businesses.
I believe we can provide access to affordable health care
for all Americans, while preserving choice for patients and
their families in selecting doctors, hospitals, health care
programs, and employment. My approach relies on the private
sector to deliver health care services. But I would make the
market work for us by enhancing competition, which will cut
costs.
B. Incentives for Family Leave Policies
A growing number of families have two wage-earners.
As a result, it is more difficult for individuals to balance
the demands of their job with the need to care for a seriously
ill or injured family member, or to take time off to have a
child or adopt one.
Employers may face significant costs from lost production,
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lost business opportunities, or other costs as the result of
extended employee absences. These costs are particularly high
for small and medium businesses that may not be able easily to
shift employees to cover for the absent worker or to hire a
temporary replacement. These smaller companies are also more
likely to experience severe economic consequences if they do
not quickly replace absent workers.
Since employers frequently must place limits on employee
absences due to the economic costs of providing leave, some
employees find themselves faced with choosing between their
employment and the serious medical or personal needs of their
families.
I propose to provide tax incentives to encourage
businesses that employ fewer than 500 employees to adopt
flexible leave policies related to childbirth, adoption or
serious family health problems. Small employers who provide
family leave to their employees would be eligible for a tax
credit of 20 percent of the cash wages that the employer
provided (or would have provided) to the employee during the
period of family leave, up to a maximum of $100 a day. The
maximum credit per employee would be $1,200 per year. The
employer must continue to provide health benefits and other
employment protection and benefits to employees on family leave
and must provide leave on a nondiscriminatory basis. ($3.1
billion)
C. Retirement Security
Many Americans rely on their pension to provide them with
a secure source of income during their retirement years. But
many employees of small businesses are not SO fortunate. Only
24 percent of small firm employees have pension coverage; the
rest -- some 26 million individuals -- have no pension at all.
Even those employees with pensions often lose accrued
benefits as retirement income when they change jobs prior to
retirement age. Current law gives workers the incentive to
cash in their benefits -- get a lump-sum payment -- rather than
to roll the money over into another retirement plan or an IRA.
I am determined to turn those incentives around -- to make
it easy for workers to make their pensions portable and take
the pension benefits they have earned in one job to the next.
Earlier this year, I was proud to sign into law a bill that
permits workers to transfer their accrued pension benefits from
their old job directly into an IRA or their new employer's
pension plan, if that plan accepts transfers. The new law also
imposes a 20 percent mandatory withholding penalty on lump-sum
payments of pension benefits that are not transferred directly
to a new retirement account. By encouraging preservation of
retirement savings, we can ensure a more secure future for
retiring workers.
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I also want to help the millions of employees without
pensions by creating a new, simplified retirement program for
small businesses, and by allowing State and local governments
and tax-exempt organizations to establish 401 (k) retirement
plans. At the same time, we will simplify the rules for
administering retirement plans. By reducing administrative
costs, more small companies and organizations will be able to
afford to provide pensions for their employees.
IX. Two Paths
We stand at a crossroads where two paths diverge in
markedly different directions. They represent competing
conceptions of the course our country should pursue.
Taxes
One path promises strengthening America's small businesses
through reducing the burden of taxes in order to stimulate
investment, research and development, and economic activity.
It would increase expensing for investments in equipment, help
businesses get started, and reduce capital gains to encourage
risk-taking.
The other path relies on substantial increases in taxes on
small business -- taxes on so-called "high income" individuals,
three quarters of whom have income from small business activity
or family farms; payroll taxes to pay for health care; payroll
taxes for training, all of which would drain profits, reduce
investment, and restrain the growth of jobs.
Regulatory Burden
One path promises a comprehensive program to simplify and
ease the burden of regulations on small businesses and to
eliminate those that are unnecessary. It would modify existing
regulations that impose a special economic burden on small
business while fending off expensive new mandates. It would
reform our product liability laws and civil justice system to
reduce the cost of insurance to small businesses and the hidden
tax of needless litigation.
The other path relies on government mandates and
regulations as the appropriate means for extensive government
intervention in the economy and accepts our current
liability laws and civil justice system as a inevitable
consequence of doing business in America.
Health Care
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One path promises assisting those who work for small
businesses by helping these businesses secure access to
affordable health insurance, by permitting the self-employed to
deduct the health insurance premiums they pay as other
businesses do, and by providing credits and deductions for
those who need it in order to purchase health insurance.
The other path relies on a mandated play-or-pay health
care scheme that effectively amounts to a doubling of the
payroll tax for most small businesses and that would quickly
cascade into ever more government provided health care.
Family Leave
One path promises to expand family leave to small
businesses by providing tax credits to offset the costs of
family and medical leave while leaving decision making and
responsibility to employers and employees.
The other path relies on a government mandate that
excludes employees of the smallest businesses and imposes a
hidden tax on employees of medium-sized businesses.
Access to Credit
One path promises a concerted effort to keep interest
rates low and to facilitate the flow of credit to small
businesses. It would reduce the cost of capital to small
businesses so that they can make needed investments to expand
their capacity and increase their productivity.
The other path relies on government direction of
additional resources to make investments in selected
industries.
Worker Training
One path promises to revolutionize education and job
training while providing worker adjustment assistance for all
dislocated workers.
The other path would mandate worker training while imposes
what amount to a 1.5 percent payroll tax on small business.
At bottom we face a choice between change that trusts
people and change that relies on greater government
intervention in managing and directing economic activity and
resources. It is a choice worth considering carefully as we
prepare for the next American centur
Possible beaders.
#1
Entrepreneurial capitalism is the sparkplug for America's
economic engine. Its energy depends on creating a climate that
encourages creativity, rewards innovation, promotes
flexibility, and requires competition. Small businesses are
essential in helping America meet the challenge of an
integrated world economy.
#2
When government permits individuals to keep the rewards of
their success, they will keep trying until they succeed. But
when government exacts a higher price for entrepreneurship, it
undermines the incentive for individuals to start new
businesses and create jobs.
That is why I want to cut the capital gains tax and index
it for inflation. But in the case of small businesses, I
propose to go one step further and cut the tax on capital gains
from small business start-ups to zero.
#3A
Small businesses need adequate access to credit.
Entrepreneurs can't do it alone. They need credit to set up
shop and then to expand. They are not looking for a handout,
but a chance to give a good return on investment.
#3B
If small business is to accelerate its role as an engine
for creating jobs we must bring down the cost of capital by
reducing costly tax and regulatory burdens. Our task is two
fold: reduce capital costs directly and reduce the paperwork
burden that fall so heavily on small businesses.
#3C/4A
Winston Churchill once said to America: "Give us the tools
and we will finish the job." This is the cry of entrepreneurs.
We hear your voice. Every day we are pushing aside the
barriers that stand in the way of building your businesses and
creating new jobs.
#4B
The ability of small businesses to grow and compete in the
global economy depends on their ability to innovate, increase
productivity, attract and retain highly-skilled workers and
find new markets for their products. The Federal government
can do its part by encouraging investment in R&D, supporting
efforts to improve the quality of our workforce, reforming our
legal system and opening foreign markets for American products
and services.
#4C
In the 21st century, our greatest national resource will
be our people. Materials, machines, and methods are also
important, but it is the American worker who will remain the
key to our economic security. Since the workplace of the 21st
century will be constantly changing, we need a workforce that
is skilled and adaptable.
#5A
Small American businesses represent an immense, largely
untapped source of export capacity. Today, small businesses
have begun to see the potential that lies in selling their
goods and services to eager markets abroad. My Administration
has been active in making that dream a reality.
#5B
If small businesses are to thrive and prosper, they must
be free to compete without the burden of unnecessary and
restrictive Federal regulation. We are working to create a
business environment in which regulations addressing legitimate
health and safety concerns are balanced with the need to
strengthen economic growth and job creation.
#5C
In order to attract and retain good workers, small
businesses need to be able to afford to provide the benefits
that will give their employees economic security. Three key
areas of concern to many workers are health benefits, family
leave policies and pension benefits.
I believe we can provide access to affordable health care
for all Americans, while preserving choice for patients and
their families in selecting doctors, hospitals, health care
programs, and employment. My approach relies on the private
sector to deliver health care services. But I would make the
market work for us by enhancing competition, which will cut
costs.
#6
We stand at a crossroads where two paths diverge in
markedly different directions. They represent competing
conceptions of the course our country should pursue.
We face a choice between change that trusts people and
change that relies on greater government intervention in
managing and directing economic activity and resources. By
choosing our path that trusts people, we can reach our goal of
a $10 trillion economy by the first years of the 21st Century.
We can succeed as an economic and export superpower. We can
win the economic competition. We can renew our nation for the
next American century.
CLOSE HOLD
DRAFT
Encouraging Entrepreneurial Capitalism:
Strengthening Small Business
I.
Introduction: The Challenge
Historians will record the twentieth century as the
American Century. It was in this century that the United
States first became actively engaged around the world.
Throughout this century, we have sought to advance two ideals
that have served us well for more than two hundred years.
Today, in country after country, given the choice, people
have chosen these two ideals -- democracy and free enterprise -
- as the path they want to pursue. We have just completed the
greatest mission in the lifetime of our country -- the triumph
of democratic capitalism over imperial communism.
Despite these victories in the marketplace of ideas, many
Americans are anxious about the future. Sluggish economic
growth in the United States, Europe, and in Japan has fueled
many of these concerns.
We sense the epic changes at work in the world and in the
economy, the uneasiness felt in the democracies who have served
as our partners.
For America to be safe and strong, we must move
confidently to meet the defining challenge of the 1990s: to
win the economic competition in an integrated global economy,
and provide Americans with prosperity and economic security.
We must be a military superpower, an economic superpower, and
an export superpower.
My agenda for renewal asks that we look forward -- to open
new markets, prepare our people to work, strengthen our
families, save and invest so that we can win. Our renewal
depends on economic growth -- but growth not for the few at the
expense of the many, not for the present at the expense of the
future.
In our country we have always prized an entrepreneurial
capitalism that grows from the bottom up, not the top down; a
prosperity that begins on Main Street and extends to Wall
Street -- not the other way around.
One of our great strengths is our capacity to innovate, to
adjust, to change, to redeploy our resources to their most
efficient uses. The economic future will belong to those
nations most able to innovate and adapt. Those burdened by
bigness often sacrifice quickness and agility for size.
Entrepreneurial capitalism involves creating a climate
that encourages creativity, rewards innovation, promotes
flexibility, and requires competition. Small businesses must
play a crucial part in America meeting the challenge of an
integrated world economy.
II. The Context: Role of Small Business in the Economy
Small business has long played an important role in the
U.S. economy. Small businesses, those businesses with fewer
than 500 employees, today employ more than 50 percent of the
U.S. work force.
They account for 44 percent of all sales and generate 39
percent of the GDP. Thirteen percent of our labor force --
15.6 million workers -- are self-employed.
Small businesses are a crucial element of our nation's
manufacturing sector. In 1991, 98 percent of all manufacturing
firms were small businesses -- 83 percent of all manufacturing
firms employed fewer than 50 workers.
Last year, 63 percent of all manufacturing jobs were
located in small businesses -- close to one in every five (18
percent) manufacturing jobs were in firms that employed less
than 50 workers. Between 1985 and 1991, small manufacturers
(less than 100 workers) created over 200,000 net new jobs.
III. Recognizing Our Strengths
Small business is one of the strengths of the U.S.
economy. They contribute to our economic well being in four
important respects.
First, our success in creating jobs is in large part
attributable to the strength of our small businesses. Small
business is the engine that propels the economy.
Small businesses create two thirds of our new jobs.
During the 1980s small businesses added about 12.5
million additional workers, while employment in
Fortune 500 companies actually declined.
From 1988 to 1990, small businesses created more than
3 million jobs -- the entire net increase in the
nation's job growth for that period in the private,
non-farm sector.
Second, small businesses are a catalyst for innovation --
the driving force in a dynamic economy. Small firms produce
about 2.4 times as many innovations per employee as large
firms. They have been responsible for over half (55 percent)
of the country's technical and industrial innovations since the
second World War.
Third, small businesses will enable the U.S. to become an
export superpower. Forty percent of all U.S. exporters are
small businesses. Every billion dollars in exports creates
20,000 new jobs.
Fourth, the dynamism of small business has provided an
avenue of advancement for minorities and women. During the
1980s, the number of Black-owned businesses grew by almost 40
percent, and the number of Black-owned manufacturing
establishments more than doubled from 1982 to 1987.
Likewise, the most recent Census bureau statistics show
more than 422,000 Hispanic-owned businesses nationally, an
increase of 81 percent from 1982. The rate of growth of
Hispanic-owned businesses is almost six times the rate for all
businesses. Between 1982 and 1987, the number of businesses
owned by Asian Americans and Pacific Islanders rose 89.3
percent.
Women are starting businesses at twice the rate of men.
Thirty percent of all small businesses in the U.S. are owned by
women. If the trend continues, nearly 48 percent of all small
businesses will be owned by women by the turn of the century.
IV. Helping Small Businesses Get Started
My Agenda for American Renewal calls for measures to
encourage the entrepreneurial spirit of our private businesses.
We must pursue tax, economic and social policies that give
incentives for entrepreneurship, rather than discouraging it.
This is common sense. When government permits individuals
to keep the rewards of their success, they will keep trying
until they succeed. But when government exacts a higher price
for entrepreneurship, it undermines the incentive for
individuals to start new businesses and create jobs.
That is why I want to cut the capital gains tax and index
it for inflation. But in the case of small businesses, I
propose to go one step further and cut the tax on capital gains
from small business start-ups to zero. These changes would
permit small business owners to keep the economic rewards they
have earned in return for the risks they have taken, giving
them a greater incentive to undertake those risks.
Some potential entrepreneurs are deterred by the high
initial costs of starting a company. Under our tax laws, they
can only deduct those expenses over many years. I propose
changing the tax laws to allow individuals to deduct up to
$2,500 of those start-up costs in the first year, when those
costs hit small business owners the hardest. ($0.5 billion)
These economic incentives should help. But sometimes
direct financial assistance is required, particularly for those
who may be unable to obtain credit to start a business from
traditional financing institutions.
In order to fill that need, the Small Business
Administration started a $15 million program earlier this year
to give unsecured loans in small amounts -- up to $25,000 -- to
budding entrepreneurs or small businesses that would like to
expand.
Finally, my Administration is seeking new ways to help
those who might wish to start a small business. The Small
Business Administration and the Department of Housing and Urban
Development, working in partnership, recently agreed to start a
pilot program in Atlanta to assist public housing residents and
other low-income residents in the neighborhood to start their
own businesses.
Under the program, the SBA and HUD provide managerial,
technical and financial assistance to residents who are
interested in starting or expanding a business to provide
services for the housing project or its residents, including
maintenance and custodial services, appliance repairs, security
services, lawn care, child care or transportation services.
V.
Helping Small Businesses Get Access to Credit and Reduce
the Cost of Capital
Small businesses need adequate access to credit.
Entrepreneurs can't do it alone. They need credit to set up
shop and then to expand. They are not looking for a handout,
but a chance to give a good return on investment.
This year we have authorized a record $6 billion in loan
authority to permit the Small Business Administration to
guarantee small business loans. This is 50 percent above the
1991 level.
I know that many small businesses have had a tough time
borrowing. We have been fighting the credit crunch in every
possible way. First, we worked with the Federal Reserve Board
to lower interest rates. Then we met with nearly every bank
regulator in the country, and told them that banks must be able
to lend to good borrowers. We made thirty separate regulatory
changes to remove federal barriers to sound lending.
Government overregulation should not stand in the way of
creating new businesses and jobs.
We took the message to the banks as well. Last week
Secretary Brady met with bank CEOs from around the country and
urged them to do more lending and less investing in government
securities. Banks must live up to their responsibilities.
Savings must be plowed back into the community to create jobs.
We have directed bank examiners to conduct their valuation
of real estate based on the ability to generate income, not on
its liquidation value.
Then we took the message to Wall Street. Working with
the Securities and Exchange Commission, we made it easier for
small companies to sell shares by eliminating the paperwork
requirements that drive up the cost of getting investors.
Winston Churchill once said to America: "Give us the tools
and we will finish the job." This is the cry of entrepreneurs.
We hear your voice. Every day we are pushing aside the
barriers that stand in the way of building your business.
If small business is to accelerate its role as an engine
for creating jobs we must bring down the cost of capital by
reducing costly tax and regulatory burdens. Our task is two
fold: reduce capital costs directly and reduce the paperwork
burden that fall SO heavily on small businesses.
I am proposing a five-year $20 billion initiative to
reduce the cost of capital for our small businesses. This
initiative includes six elements:
Reducing the corporate tax rate for small
businesses from 15 percent to 10 percent. ($5.5
billion)
Increasing the current expensing limit from $10,000
to $25,000; ($8.4 billion)
Granting Alternative Minimum Tax relief for
preferences arising from active participation in a
small business; ($1.7 billion)
Eliminating capital gains taxes on newly issued small
business stock; ($0.7 billion)
Allowing small businesses to elect inflation-adjusted
inventory accounting rules; ($2.6 billion)
Exempting small business from uniform capitalization
and long-term contract rules. ($0.3 billion)
Enhancing and simplifying pension rules for small
business. ($0.9 billion)
VI. Helping Small Businesses Expand Employment and Increase
Productivity
Small businesses today face a new competitive environment
-- challenged not only by competitors in their neighborhood,
their city and throughout the Nation, but also by competing
firms from around the world. In the new global economy, each
of our companies -- from the largest to the smallest -- must
have the tools they need not only to compete, but to win.
The ability of small businesses to grow and compete in the
global economy depends on their ability to innovate, increase
productivity, attract and retain highly-skilled workers and
find new markets for their products. The Federal government
can do its part by encouraging investment in R&D, supporting
efforts to improve the quality of our workforce, reforming our
legal system and opening foreign markets for American products
and services.
A.
Supporting Innovative Research
In order to be the world's economic leader tomorrow, we
must invest in research and development and foster new
technologies today. That is why I want to make the research
and experimentation tax credit permanent. This credit, which
was adopted in 1981 to encourage increased private R&D
spending, has been renewed periodically for a year or two at a
time. It is time to create predictable rules small businesses
can count on when making R&D investment decisions by renewing
it permanently.
Our Small Business Innovation Research (SBIR) program
fosters the pioneering spirit of small businesses in research
and development activities. Under the SBIR program, eleven
major Federal agencies set aside a percentage of their R&D
funds for contracts with small firms.
Under my Administration, the portion of the Federal R&D
budget set aside for small business has doubled from 1.25
percent to 2.5 percent. Since the program began ten years ago,
more than $2.2 billion in Federal R&D funding has been directed
to small businesses.
One of the goals of the SBIR program is to encourage small
firms to develop products and technologies that have commercial
applications. At least one in four SBIR award winners has
achieved commercial sales or expects that commercial sales will
occur.
B. Improving the Quality of Our Workforce
In the 21st Century, our greatest national resource will
be our people. Materials, machines, and methods are also
important, but it is the American worker who will remain the
key to our economic security. Since the workplace of the 21st
Century will be constantly changing, we need a workforce that
is skilled and adaptable.
Those industries showing the fastest rate of growth in
employment in the decade between 1977-1987 included many small-
business-dominated industries that require highly-trained
workers: engineering, architectural, business and recreation
services and automotive repair. Those growing industries with
a skilled workforce will have an advantage in the new global
marketplace.
That is what my American 2000 program is all about. It
includes four crucial elements. The first is accountability.
Our students can't beat world class competition if they can't
meet world class standards. We are moving ahead with the
development of these standards in math, science, English,
history, geography, arts and civics. And we need voluntary
national achievement tests to measure the progress of our
students in meeting these standards.
The second is innovation. We need break-the-mold New
American Schools that will transform our classrooms by
developing and implementing the latest in technology and ideas
for teaching our students.
The third is flexibility. We need to give schools the
flexibility to become educational entrepreneurs --to figure out
the best ways to motivate our children, use technology, include
parents and involve new types of teachers.
The fourth is competition and choice. We must give
parents the ability to choose which school their children will
attend -- public, private or religious.
We must prepare workers for the prospect of changing jobs
and learning new skills many times throughout the course of a
productive life. In January 1992, I announced a plan to
streamline the Federal job training system through "one-stop
shopping" in every community. Experience has demonstrated that
the most effective training and placement services are those
closely developed with local employers through private industry
councils. That way the training is designed to develop skills
that employers know they will need.
My expanded job training proposal has three key features:
(1) universal coverage, so all dislocated workers will have
access to basic transition assistance and training support; (2)
skill grant vouchers of up to $3000 to help meet the costs of
adding new skills and training; and (3) a tripling of the
resources currently devoted to training and worker adjustment,
an allocation of $10 billion over five years.
I have also proposed a specially-targeted Youth Skills
Initiative. The Initiative includes creation of a new Youth
Training Corps to provide economically and socially
disadvantaged young people with intensive vocational training,
and a National Youth Apprenticeship Program to provide skills
training for young people not planning to attend college.
C. Reforming Our Legal System
America has suffered a civil litigation explosion. Over
the past 30 years, Federal lawsuits have almost tripled.
Instead of being fast, fair and affordable, our civil justice
system is slow, expensive, and putting us at a global
disadvantage.
The cost of litigation affects businesses of every size.
Long delays in resolving disputes waste valuable judicial
resources, force early settlement by those who cannot afford to
wait, discourage those who have meritorious suits, and
encourage frivolous suits by those who hope to leverage unjust
settlements. High punitive damage awards are passed on to
consumers through higher prices, job cuts, higher insurance,
and fewer new products.
My product liability reform legislation confronts the
trial lawyers head on. I want to stop wide variation among
states' product liability rules; stop important products from
being kept off the market; stop excessive litigation costs with
more money going to lawyers than to injured consumers; cut
excessive insurance rates; and end excessive consumer costs.
My "Access to Justice Act of 1992" is intended to restore
fairness and efficiency to the nation's civil justice system
through: alternatives to Federal civil trials such as
alternative dispute resolution; incentives for pre-litigation
settlement, including pre-complaint notification; and a "loser
pays" rule requiring the loser to pay the winner's legal fees
in suits involving Federal diversity jurisdiction.
We also need to continue our work with the States to
encourage fundamental change at the State and local level.
D. Expanding and Opening Foreign Markets
America is an exporting nation. In 1991, we regained the
position of the world's number one exporter. Even more
impressive, a relatively small percentage of American firms are
responsible for most U.S. exports. Fifteen percent of U.S.
firms account for nearly 85 percent of U.S. exports.
Small American businesses represent an immense, largely
untapped source of export capacity. Today, small businesses
have begun to see the potential that lies in selling their
goods and services to eager markets abroad. My Administration
has been active in making that dream a reality.
Through the programs of the Small Business Administration
(SBA) and the Department of Commerce, we have provided
information, counseling, training and even financing to
thousands of small businesses who are dealing for the first
time with the challenges of the international marketplace. The
Department of Commerce has held over thirty international trade
conferences and seminars across the country to work with small
businesses, to provide information they need to market their
products overseas, and to identify U.S. government programs and
sources of financing that can help them get started. In
addition, the Commerce Department's Matchmaker program has
introduced hundreds of small businesses to foreign markets,
arranging for them to meet directly with potential foreign
buyers for their products.
The SBA has encouraged small businesses to take advantage
of its Export Revolving Line of Credit program. This special
pilot project provides a revolving working capital line of
credit to help small manufacturers bridge the gap between
receipt of orders of their goods and receipt of payment.
Export loans under the Line of Credit program jumped from $4.85
million in 1990 to over $26 million in 1991. In the first
three quarters of 1992, the SBA extended $28 million in loans
to small exporters under this program.
All SBA loans to exporters increased from $42 million in
1990 to $123 million in 1991, with an additional $195 million
in loans during the first three quarters of 1992.
Of course, it is the private sector that must lead the
charge in taking advantage of opportunities to market American
products abroad, but where government can help in opening
markets and making those first steps a little easier we will
continue to do SO.
E.
Creating Enterprise Zones
Our inner cities and rural areas suffer from a lack of
economic opportunities for their residents. In order to entice
individuals to establish small businesses in these areas, I
have proposed creating enterprise zones. Workers employed by
enterprises in the zone would be eligible for a tax credit on
wages. Inner city entrepreneurs starting businesses and small
investors who start or purchase businesses located in
enterprise zones would be entitled to deduct up to $50,000 on
their personal income taxes each year, and would not be taxed
on capital gains resulting from their investment.
These measures will promote entrepreneurship and job
creation in economically distressed urban and rural
communities.
VII. Clearing Away the Regulatory Maze
If small businesses are to thrive and prosper, they must
be free to compete without the burden of unnecessary and
restrictive Federal regulation. We are working to create a
business environment in which regulations addressing legitimate
health and safety concerns are balanced with the need to
strengthen economic growth and job creation.
In my State of the Union Address last January, I
announced, and have since extended through August 28, 1993, a
regulatory reform initiative which places a moratorium on new
Federal regulations that stifle economic growth. I also
instructed Federal agencies to look for ways to modify existing
regulations that impose a special economic burden on small
business.
In addition, we have undertaken several reforms to reduce
the costs and burdens imposed on small businesses in complying
with the Federal tax system.
A. Reducing the Costs of the Payroll Tax System
Last May my Administration announced several initiatives
that will reduce administrative costs for the more than five
million employers who must report employment taxes. The
reforms will:
Simplify the Payroll Tax Deposit System. The
Internal Revenue Service (IRS) and Department of the
Treasury will publish a proposed regulation that will
enable as many as 75 percent of all employers to make
payroll tax deposits once-a-month, replacing the
current rules which require many employers to make
deposits as often as twice a week. Larger employers
can deposit payroll taxes on a fixed day of the week,
depending on the payroll date.
These simplifications will reduce substantially the
costs to employers, particularly small businesses, of
complying with payroll tax regulations. In addition,
these changes are expected to reduce payroll tax
penalties by more than 20 percent.
Simplify the Reporting of Federal Employment Taxes.
The IRS is developing a simplified new form, Form
941EZ, that is expected to reduce substantially the
compliance burdens of more than 3.5 million small
employers. The new form, which the IRS anticipates
will be available by the first quarter of 1994, will
eliminate information that is ordinarily relevant
only to large businesses.
The development of Form 941EZ follows other IRS
initiatives designed to simplify forms for small
businesses. In 1990, the IRS introduced a simplified
version of the form for reporting Federal
unemployment taxes. This new form is now used by
approximately 700,000 small employers at an estimated
annual savings of up to 10 million taxpayer hours.
Enable Employers to Deposit Payroll Taxes
Electronically. Last year, employers filed over 80
million paper coupons to accompany Federal payroll
tax deposits of almost $850 billion. The IRS is
testing a program to allow employers to make payroll
tax contributions directly to a designated Treasury
account. This experimental, voluntary program has
been made available to employers in South Carolina,
Florida and Atlanta, Georgia.
Establish a Single Wage Reporting System.
Traditionally, employers must file employment tax
forms for each employee with the IRS, the Social
Security Administration, and State and local tax
agencies. The IRS, Social Security Administration
and the Department of Labor recently agreed to
develop jointly a new Single Wage Reporting System.
The new system would require only one filing, thereby
saving substantial administrative costs. The Federal
agencies will work closely with State organizations
in refining and implementing this system.
Offer an On-Line Tax Identification Number Matching
Service. The IRS plans to establish a service to
allow employers to verify employees' tax
identification numbers (such as a social security
number) through a telephone call. This service will
eliminate an employer's need to engage in burdensome
paperwork and correspondence with the IRS. The IRS
anticipates that this program will be made available
to all employers in the 1993.
B.
Reducing Other Tax-Related Burdens
We are also working to reduce the burdens on small
businesses in complying with other aspects of the Federal tax
system. These reforms will allow:
Deductibility of Preparation Fees. On April 1, 1992,
the IRS released a ruling allowing more than 16
million sole proprietors, including farmers, to
deduct business-related tax preparation fees as a
business expense rather than as a limited itemized
deduction.
Joint Federal-State Filing. The IRS is working with
States on a pilot program for the joint electronic
filing of Federal and State tax returns. In 1992,
the IRS implemented this program an a State-wide
basis in South Carolina and on a more limited basis
in six other States. The IRS expects to add
additional States during the coming year.
Participation in Educational Initiatives for Small
Businesses. In the past year, the IRS has informally
contacted over 150,000 small businesses having
difficulty complying with Federal tax deposit
requirements. The IRS is now working with these
taxpayers, outside the formal audit and enforcement
context, to address compliance concerns. In
addition, during Fiscal Year 1991 the IRS conducted
over 2,400 Small Business Tax Education Workshops and
seminars which were attended by more than 80,000
executives.
VIII.
Helping Small Businesses Provide for Their Workers
In order to attract and retain good workers, small
businesses need to be able to afford to provide the benefits
that will give their employees economic security. Three key
areas of concern to many workers are health benefits, family
leave policies and pension benefits.
A.
Affordable Health Care for Small Businesses and the
Self-Employed
Our current health care system provides high quality,
high-tech medicine, but at an unacceptable price: spending has
increased at a rate two to three times the rest of the economy;
thirty-four million Americans have no health insurance and
millions more are afraid to change jobs for fear of losing
their health insurance.
My comprehensive program to reform our health care system
includes provisions that encourage small businesses to reduce
their health insurance costs by pooling their purchasing power.
By joining together to form Health Insurance Networks, small
employers can have the same market clout and market
sophistication of the biggest players in the health care
marketplace. Group purchasing can reduce health insurance
costs by as much as 16 percent through economies of scale,
lower administrative costs and greater leverage to negotiate
better rates with insurers.
Small employers also face the possibility of skyrocketing
insurance premiums, or the inability to obtain any health
insurance at all, if even one employee is seriously ill. My
plan guarantees insurability so that people with "preexisting"
illnesses cannot be denied a job or health coverage on the job.
Our health care plan guarantees affordable coverage
through a two-phase process. In the short term, we will limit
the difference in premiums that an insurer may charge to groups
with different health risks, so that no employer has to pay
astronomical insurance premiums. In the next phase, we will
create risk pools both for small businesses and for individuals
and families receiving tax credits for health insurance.
Health plans insuring a sicker than average population would
receive a net transfer from the risk pool while other insurers
will be net payers into the pool.
My plan will also benefit the self-employed, permitting
them to deduct 100 percent of their health care insurance
premiums as opposed to the 25 percent they currently are
permitted to deduct. ($5.0 billion) This is fair and treats
them similarly to other businesses.
I believe we can provide access to affordable health care
for all Americans, while preserving choice for patients and
their families in selecting doctors, hospitals, health care
programs, and employment. My approach relies on the private
sector to deliver health care services. But I would make the
market work for us by enhancing competition, which will cut
costs.
B. Incentives for Family Leave Policies
A growing number of families have two wage-earners.
As a result, it is more difficult for individuals to balance
the demands of their job with the need to care for a seriously
ill or injured family member, or to take time off to have a
child or adopt one.
Employers may face significant costs from lost production,
lost business opportunities, or other costs as the result of
extended employee absences. These costs are particularly high
for small and medium businesses that may not be able easily to
shift employees to cover for the absent worker or to hire a
temporary replacement. These smaller companies are also more
likely to experience severe economic consequences if they do
not quickly replace absent workers.
Since employers frequently must place limits on employee
absences due to the economic costs of providing leave, some
employees find themselves faced with choosing between their
employment and the serious medical or personal needs of their
families.
I propose to provide tax incentives to encourage
businesses that employ fewer than 500 employees to adopt
flexible leave policies related to childbirth, adoption or
serious family health problems. Small employers who provide
family leave to their employees would be eligible for a tax
credit of 20 percent of the cash wages that the employer
provided (or would have provided) to the employee during the
period of family leave, up to a maximum of $100 a day. The
maximum credit per employee would be $1,200 per year. The
employer must continue to provide health benefits and other
employment protection and benefits to employees on family leave
and must provide leave on a nondiscriminatory basis. ($3.1
billion)
C. Retirement Security
Many Americans rely on their pension to provide them with
a secure source of income during their retirement years. But
many employees of small businesses are not so fortunate. Only
24 percent of small firm employees have pension coverage; the
rest -- some 26 million individuals -- have no pension at all.
Even those employees with pensions often lose accrued
benefits as retirement income when they change jobs prior to
retirement age. Current law gives workers the incentive to
cash in their benefits -- get a lump-sum payment -- rather than
to roll the money over into another retirement plan or an IRA.
I am determined to turn those incentives around -- to make
it easy for workers to make their pensions portable and take
the pension benefits they have earned in one job to the next.
Earlier this year, I was proud to sign into law a bill that
permits workers to transfer their accrued pension benefits from
their old job directly into an IRA or their new employer's
pension plan, if that plan accepts transfers. The new law also
imposes a 20 percent mandatory withholding penalty on lump-sum
payments of pension benefits that are not transferred directly
to a new retirement account. By encouraging preservation of
retirement savings, we can ensure a more secure future for
retiring workers.
I also want to help the millions of employees without
pensions by creating a new, simplified retirement program for
small businesses, and by allowing State and local governments
and tax-exempt organizations to establish 401(k) retirement
plans. At the same time, we will simplify the rules for
administering retirement plans. By reducing administrative
costs, more small companies and organizations will be able to
afford to provide pensions for their employees.
IX. Two Paths
We stand at a crossroads where two paths diverge in
markedly different directions. They represent competing
conceptions of the course our country should pursue.
Taxes
One path promises strengthening America's small businesses
through reducing the burden of taxes in order to stimulate
investment, research and development, and economic activity.
It would increase expensing for investments in equipment, help
businesses get started, and reduce capital gains to encourage
risk-taking.
The other path relies on substantial increases in taxes on
small business -- taxes on so-called "high income" individuals,
three quarters of whom have income from small business activity
or family farms; payroll taxes to pay for health care; payroll
taxes for training, all of which would drain profits, reduce
investment, and restrain the growth of jobs.
Regulatory Burden
One path promises a comprehensive program to simplify and
ease the burden of regulations on small businesses and to
eliminate those that are unnecessary. It would modify existing
regulations that impose a special economic burden on small
business while fending off expensive new mandates. It would
reform our product liability laws and civil justice system to
reduce the cost of insurance to small businesses and the hidden
tax of needless litigation.
The other path relies on government mandates and
regulations as the appropriate means for extensive government
intervention in the economy and accepts our current
liability laws and civil justice system as a inevitable
consequence of doing business in America.
Health Care
One path promises assisting those who work for small
businesses by helping these businesses secure access to
affordable health insurance, by permitting the self-employed to
deduct the health insurance premiums they pay as other
businesses do, and by providing credits and deductions for
those who need it in order to purchase health insurance.
The other path relies on a mandated play-or-pay health
care scheme that effectively amounts to a doubling of the
payroll tax for most small businesses and that would quickly
cascade into ever more government provided health care.
Family Leave
One path promises to expand family leave to small
businesses by providing tax credits to offset the costs of
family and medical leave while leaving decision making and
responsibility to employers and employees.
The other path relies on a government mandate that
excludes employees of the smallest businesses and imposes a
hidden tax on employees of medium-sized businesses.
Access to Credit
One path promises a concerted effort to keep interest
rates low and to facilitate the flow of credit to small
businesses. It would reduce the cost of capital to small
businesses so that they can make needed investments to expand
their capacity and increase their productivity.
The other path relies on government direction of
additional resources to make investments in selected
industries.
Worker Training
One path promises to revolutionize education and job
training while providing worker adjustment assistance for all
dislocated workers.
The other path would mandate worker training while imposes
what amount to a 1.5 percent payroll tax on small business.
At bottom we face a choice between change that trusts
people and change that relies on greater government
intervention in managing and directing economic activity and
resources. It is a choice worth considering carefully as we
prepare for the next American century.
6
Small business is one of the most effective ways to bring
minority Americans into the economic mainstream. That's why
later today, Pat Saiki will release our plan to streamline the
SBA's Minority Small Business program to bring economic
opportunity to entrepreneurs all across America.
[[And tomorrow, Pat's going to go on to South Florida, to
kick off what we call the Green Line program -- a program we
which will
test-marketed up in New England -- to provide a revolving line of
credit to help small companies bridge the gap between production
and payment. This Green Line initiative should be especially
helpful to small firms seeking to get back to "business as usual"
after Hurricane Andrew. ]]
Fourth, we've got to help small business hire new workers
and increase productivity. / Small businesses -- like every
employer in America -- will benefit from education reforms like
America 2000 -- from our expanded job training initiatives / from
enterprise zones / and legal reform that ends the sky's-the-
limit lawsuits that can drive a small business into bankruptcy.
But even all of that is not enough.
That's why I support aggressive new export promotion
programs to help small businesses crack new markets abroad, and
create new jobs here at home. / You see, in the 21st Century,
America must be not just a military superpower, but an economic
superpower -- an export superpower. Right now, a fraction of
America's companies -- 15 percent -- account for 85 percent of
America's exports. We've got to open new markets for America's
clerk, Sen. For. Rel. Comm.
Fulburg) Fulbright
THE WASHINGTON WHITE
HOUSE
grat.
1974 28
1946
b.
grad H.S. 1964
clerk
Gtown
19
during college
grad. class of 188
While in college, he
worked in the mailroom
of the
fullbright
(Gtown)
junior yr. clerk
1967 on campaign
National Republican Congressional Committee
To:
DAN MC GORARTY
60
From: R. BILLMIRE
(202) 479-7070 Ext
Date: 11
Total # of Pages: TO Follow 3
Comments:
n
URGENT
"F.Y.I." ONLY
CONFIRM RECEIPT
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the sender which is confidencial and may be legally privileged. The information is in-
tended only for the use of the individual or entity named above. If you are not the in-
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taking of any action in reliance on the contents of this telecopied information is strictly
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phone to arrange for return of the original document to us.
North Carolina Business
Can't Afford Bill Clinton
New Taxes
In 1993, Bill Clinton's new mandates and taxes would cost $101 billion, fully 54%
of 1991 U.S. business profits.
Clinton's new mandates and taxes will include, but are not necessarily limited to:
a 1.5% payroll tax for worker retraining
only apply to firms Carney w/ 50 said + employees Clinton said this
-
a 7-9% payroll tax to finance his "pay or play" health insurance plan
-
a CAFE Standard of 45 mpg
a minimum wage indexed to inflation
-
a new top tax rate of 36%, falling heavily on small business owners
new taxes on in-state foreign businesses
Clinton's New Bureaucracies
Clinton's new bureaucracies mean more regulation and government intrusion:
.
a "health standards board" to regulate universal access health insurance
.
a "national information network" linking every home, business, lab,
classroom and library into a national network
-
& staff to solicit, supervise and manage monies collected for the Rebuild
America Fund which will tap private sector and pension fund assets
.
a national network of community development banks to manage inner-city
lending and "mobilize" private lenders
-
a national industrial planning bureaucracy to pick industry "winners and
losers"
-
a worker retraining bureaucracy to collect new taxes and enforce Clinton's
new mandate program
New Business Costs
The new 8.5 to 10.5% payroll taxes will hit businesses not currently providing
Clinton-style health insurance and worker training. Since wages account for
slightly more than 50% of an average company's expenses, these payroll taxes
will increase overall costs of the affected firms by 4.5 to 5.5%
Increased costs also will result from: an indexed minimum wage ($360 annually per
employee), a 45 mpg CAFE standard and 12 weeks of mandated family leave.
Falling Profits
Increased costs of 4.5 to 5.5% could eliminate profits:
- The average return on sales among retailers is 2%.
- The average return on sales among manufacturer is 4%,
Hardest Hit: Small Businesses and Their Employees
Small businesses and their employees will be bit hardest:
- Their markets often are too competitive to raise prices.
IF you are like
- They've already cut costs to the bone.
Small businesses will face a tough choice: fire people or close down.
Here are two examples of how the Clinton Plan would affect small businesses:
- 57% of small businesses with 5 to 9 employees have annual sales of $100,000
to $500,000. A 2% profit margin gives the latter a $10,000 profit.
Clinton's new taxes would cost $23,000 to $28,000 annually. That
means firing at least 1 employee.
- 54% of small businesses with 10 to 19 employees have annual sales of
$500,000 to $1 million. A 2% profit margin gives the latter a $20,000
profit.
Clinton's new taxes would cost $46,000 to $56,850 annually. That
means firing at least two or three employees.
Is Small Business Important to North Carolina?
The big increase in costs would cut out the heart of North Carolina's economy,
small business:
- 25% of the state's workforce, or 638,000 people, work in businesses with
fewer than 20 employees
- 40% of the state's workforce, or 1 million people, work in businesses with
fewer than 50 employees
- 37% of North Carolina retailers have fewer than 20 employees; 21% have
fewer than 10.
- 21% of North Carolina manufacturers have fewer than 100 employees;
11% have fewer than 50.
Who Are the Victims of Clinton's Taxes?
Clinton's taxes will affect the retail businesses on Main Street - your friends and
neighbors. For example:
- Among more than 4,800 34 North Carolina grocery stores employing 78,000
people at an annual payroll cost of $689 million, nearly 70% employ less
than 10 people.
- Among nearly 3,535 North Carolina furniture stores employing nearly
1989 Cennus data
23,000 people at an annual payroll cost of $337 million 81% employ
fewer than 10 people.
mot
Other small businesses profiled in the Appendix include laundries, book stores,
necent
hardware stores, beauty shops, movie theaters, sporting goods stores and repair shops.
you
Manufacturers will not be spared. For example:
- North Carolina's 11,600 building trades companies employ more than 91,000
people and have an annual payroll of $1.6 billion. 81% of these sub-
4065
contractors - carpenters, electricians, etc. -- employ fewer than 10
people.
. More than 700 North Carolina fabricated metal firms employ 31,000 people
on an annual payroll of $676 million. 58% have fewer than 20 workers.
Other small manufacturers profiled in the Appendix include food processing firms,
lumber products, furniture, printing & publishing, and trucking and warehousing.
Taxes on In-State Foreign Firms
Clinton plans to raise $9 billion in 1993, and $45 billion over the next four years, by
ending alleged tax avoidance by foreign firms operating in the U.S. But tax experts
say his plan will raise only $1-$3 billion.
To hit his tax target, Clinton will then have to raise other taxes costing more U.S.
jobs and cutting investment:
- The taxes projected annually would nearly equal the 1989 net income ($9
billion) of these firms, which employ 4.7 million Americans.
- In North Carolina, foreign firms employed 180,000 people in 1990, and have
invested $13.8 billion in the state.
SENT BY:
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NRC
National Republican Congressional Committee
To:
CAROL AARHUS
From: JOE LOUGHRAN (202) 479-7050 Ext
Date: 9/21/92 Total # of Pages: 9 pp
Comments: Copy DAN.
JOE CAN READ "WHITE" NUMBERS
THAT PROBABLY WON'T PRINT
GIVEN FAX RESOLUTION /
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CONFIRM RECEIPT
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taking of any action in reliance on the contents of this telecopied information is strictly
prohibited. If you received this telecopy in error, please immediately notify us by tele-
phone to arrange for return of the original document to us.
Richard
Billmine 7060
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2024566218;# 2
Data Sources
Part I: A Business Profile
o Business Information
Information for "Goods & Services" and "% Total State Product" comes from "Gross State
Product by Industry, 1977-89," Survey of Current Business, December 1991, Edward A Trott,
Jr., Ann E. Dunbar, and Howard Friedenberg.
o Payroll Information
Information on "Annual Payroll" and "Total Employees" comes from County Business
Patterns. 1988 and 1989. Bureau of the Census. 1992. (Henceforth "County")
The technical citation is: County Business Patterns. 1988 and 1989 on CD-ROM/ prepared by
Data Access and Use Staff, Data User Services Division, Bureau of the Census, Washington,
1992.
Note: The 1989 business census information on industry employment was used--rather
than the 1990 census-because it is from the same database as the business establishment
size, etc., information used later in the study.
o Small Business Employment
These figures are derived from the County data; i.e. totals for different sized establishments
are summed, and divided by all business totals.
Part II: The Clinton Plan
o Clinton Business Mandates & Taxes
"A National Economic Strategy for America," (ANESA), June 21, 1992, is the source for all
quotes concerning:
Worker Retraining
Universal Health Insurance
45 MPG CAFE Standard
Family & Medical Leave
Pension Fund
New User Fees
Data Sources are as cited, except for derived total on the Minimum Wage.
SENT BY:
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2024566218;# 3
The $360-a-year Minimum Wage cost was derived from information contained in the
study, "Putting People Out of Work," prepared by the Minority Staff of the Joint
Economic Committee. The JEC estimated that an a minimum wage indexed to
inflation would equal an hourly increase of 18 cents per hour. Assuming a 50-week,
2,000 hour work-year, the annual increase would equal $360 per effected employee.
o New Bureaucracies
All information derived from "ANESA."
Part III: The Clinton Plan/Impact on Individual Business
o
Computing Clinton's Added Business Costs
"Payrolls average 53% of total costs" was derived using the following formula:
(Labor costs as % of total costs)
.70
X (Wages as % of total employee compensation) OR
x ,75
= Wages as % of total costs.
=.525
The data for this computation comes from several sources:
- Labor costs account for about 70% of business costs. (Source: Michael
Boskin, National Economists Club, 3/31/92)
- Wages were assumed to equal 75% of total employee compensation. This
figure was derived using the non-union and small firm data listed below
because it would be more representative of the smaller businesses
addressed in this study:
The annual BLS report on employee compensation released every
March shows that the 1991 average was 71.8% figure for all private
sector employees (BLS Employment Cost Index, June 29, 1992, as
reported in BNA Daily Report for Executives, June 30,1992).
Wages as a % of compensation were 64.6% for union workers and
73.6% for non-union workers. (Tbid)
An earlier BLS study showed that in 1989, wages as a % of
compensation varied by firm size: 69.3% for firms with more than 500
workers, 72.1% for firms with 100-499 workers, and 74.7% for firms
with 1-99 employees. (Wayne Shelly, "Compensation and Working
SENT BY:
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2024566218:# 4
Conditions" BLS, August 1991, as reported in BNA Pensions & Benefits
Daily, Oct. 3, 1991.)
The figure for retailers was 77.3% in March 1987. (Donald Wood,
Survey of Current Business, November, 1987.)
The increase in total costs is obtained by multiplying 8.5% and 10.5% by 53% to yield
4,4625% and 5.5125%, respectively. Those figures were rounded to 4.5% and 5.5%.
o
Small Business Income Statement
Sales figures by size firm were found in The State of Small Business. 1991, Table
A.35, page 157.
Income Statement figures used in the computation are cited or derived, except for the
2% return on sales figure which is described below.
o (Name of State) Retailers/(Name of State) Manufacturers
$ Goods & Services, $ Annual Payroll, and number of employees statistics obtained
from each state's County publication. These figures are displayed in Part I, but
rounded in this section.
Small Retail Operations/Small Manufacturers Figures are replicated or derived--through
addition and division operations--from County publication for each respective state.
"Examples" data on the various retail and manufacturing firms was also derived from
the County publication for each state.
o Return on Sales
Retailers' Return on Sales of 2% sources (separately summarized below) include:
1) The Bureau of the Census tracks "Profits per dollars of sales" for retail
corporations, as published in the Statistical Abstract of the United States, 1991 (Chart
No. 909, page 549).
2) Fortune magazine's "Retum on Sales" for retailers in its "Service 500" series,
published in its early June issue.
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;
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2024566218:# 5
Historical Return on Sales for Retailers
91
90
89
88
87
86
85
84
83
80
SAUS
1.0
1.1
1.9
2.0
2.2
2.3
2.2
2.6
2.7
1.7
Fortune
1.7
1.7
2.4
2.5
2.4
2.4
2.7
2.9
2.6
Manufacturers' Return on Sales of 4% sources (separately summarized below) include:
1) The Economic Report of the President (ERP) shows "Profits after income taxes per
dollar of sales" in its tables describing corporate profits and finance. The average for
all manufacturing corporations from 1980 through 1989 is 4.51%, ranging from a low
of 3.5% (1982) to a high of 6.0% (1988).
2) In its spring issue, Fortune shows "Return on Sales" figures for Fortune 500
companies in more than 20 industry groups. The median return on sales for all the
"500's" manufacturing companies was 4.37% from 1985 through 1991 period, ranging
between 1991's low of 3.2% to 1988's high of 5.5%.
Industry medians from this series were matched to similar industries profiled in the
appendix.
Historical Return on Sales for Retailers
91
90
89
88
87
86
85
84
83
82
81
ERP
4.0
5.0
6.0
4.9
3.7
3.8
4.6
4.1
3.5
4.7
Fort
3.2
4.1
4.7
5.5
5.1
4.1
3.9
o Foreign Firms Operating in (State)
"Joint Committee on Taxation raise only $1 billion."
Letter of July 15, 1992 from JCT to Sen. Pete Domenici, R-NM. The Senate
Budget Committee minority reported its findings in its weekly "Budget
Bulletin," noting that the Clinton proposal to reform Section 482, "would raise
$1 billion over four years---not $45 billion." (Source: Congress Daily,
National Journal, July 27,1992.)
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2024566218:# 6
0 The Cost to American Business
Statement: II entire 1989 net income of foreign firms operating in the U.S. In 1990,
they lost $4.9 billion." Source: "U.S. Affliates of Foreign Companies: Operations in
1990", Steve D. Bezirganian, Survey of Current Business, May 1992, pages 45-62.
The information, rounded to the nearest $100 million, is displayed in Table 1 of the
article.
Statement: "... employed 4.7 million Americans II This information is also
displayed in Table 1 of the above-mentioned Survey of Current Business article.
o
The Cost to (State)
The 1990 employment information reflecting non-bank U.S. affliates is contained in
Table 5 of: "U.S. Affliates of Foreign Companies: Operations in 1990," Steve D.
Bezirganian, Survey of Curent Business, May 1992, pages 45-62.
The value of plant and equipment for each state is for 1989 and is from: Foreign Direct
Investment in the United States, Preliminary 1989 Estimates, Table D-12, U.S.
Department of Commerce, Economics and Statistics Administration, BEA, August
1991.
Region II
30,900,154
3,065,589
9.9
9.1
8,811,175
14.8
59.5
37,319,189
3,408,915
59,527,163
43.1
99.3
Region III
5,515,772
8.3
95,305,837
10,992,286
11.5
Region W
66,605,226
10,567,655
11.2
28.8
63.5
6,463,322
8.8
94,584,181
Region V
73,456,559
7,837,310
11.0
23.8
72.7
7.9
71,402,085
105.8
Region VI
57,683,340
4,538,872
-7.6
35,975,862
4,282,596
11.9
35.1
26,636,767
2,080,737
2,130,393
29.2
76.5
Region VII
10.1
1,206,690
7.4
21,108,325
Region VIII
16,337,108
10.8
22,157,109
15.8
116.6
217.0
SENT BY:
64,684,469
6,989,048
140,129,909
67.1
115.1
Region IX
1,528,716
8.6
29,779,482
3,287,562
110
Region X
17,823,850
Note: Detail may not add to totals due to disclosure rules regarding Maine, Massachusetts, the release of information New Hampshire, for specific Rhode taxpayers. Island, Vermont; SBA regions, Florida, Region which II: Georgia, New correspond Jersey, Kentucky, New to
federal York; Region regions, 11: are Delaware, Camlina, defined as South District follows: Carolina, of Region Columbia, Tennessee; 1: Corinecticut, Maryland, Region V Pennsylvania, Illinois, Indiana, Virginia, Michigan, West VIII: Minnesota, Virginia; Colorado, Region Ohio, Montana, Wisconsin; IV: Alabama, North Region Dakota, Vc South Arkansas, Dakota, Louisiana, Utah,
Mississippi, New Mexico, North Oklahoma, Texas; Region VII: towa, Kansas, Missouri, Nebraska; Alaska, Idaho, Region Oregon, Washington, Data for 1988 are preliminary.
Wyoming: Source: Special Region IX: tabulations Arizona, California, prepared by Hawaii, the U.S. Nevada; Department and; Region of the X: Treasury, Internal Revenue Service, under contract to the U.S. Smail Business
Administration, Office of Advocacy, December 1990.
1977
19782
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
Year
cacy, December 1990.
21978 data represent a weighted average.
Average Annual Percent
; 9-21-92 ; 15:10
Revenue Service, under contract to the U.S. Small Business Administration, Office of Advo
and men-owned nonfarm sole proprietorships will not sum to total.
Change, 1977-1988
Source: Special tabulations prepared by the U.S. Department of the Treasury, Internal
Includes jointly owned nonfamm sole proprietorship businesses. Therefore, women owned
8.4
1,900,723
2,121,060
2,341,397
2,535,240
2,780,277
2,942,366
3,254,248
3,382,769
3,738,107
4,121,352
4,462,264
4,610,951
Businesses
Women-Owned
Nonfarm Soles Proprietorships by Gender, 1977-1988
NRCC CAMPAIGN DIV!-
5.5
8,413,806
8,878,705
9,343,603
9,730,019
10,545,337
11,170,204
11,781,015
12,495,141
13,296,751
13,798,340
14,548,946
15,158,567
Businesses
All
4.4
6,255,184
6,502,283
6,749,382
6,928,659
7,480,655
7,787,830
8,064,612
8,643,431
9,075,651
9,243,927
9,576,494
10,027,537
Businesses
Men-Owned
2024566218;# 7
277
EO
415
799
085
393
072
298
022
762
370
746
080
770
260
2
Office, 1990) Table 2.
au the Censisis Women-Owned I-Owned Business 1987 (Wash-
Business Administration, Office of Advocacy, from the
90,285
58,941
18,973
13,976
18,831
969
559,821
60,367
962'01
29,810
13,374
17,747
89,411
32,285
-87,658
53,505
ESTES
1987
52.3
45.6
41.6
47.3
61.3
-50.5
57.9
72.6
28.6
56.3
42.8
44.7
39.1
55.9
1982-1987
Change,
Percent
usinesses by SBA Region and State, 1982 and
SENT BY:
41.9
62.7
45.5
48.5
29
38
47
35
17
LE
19
6
50
23
44
42
48
25
46
15
39
34
Rank
Women-Owned Businesses with and without Paid Employees by SBA Region and State, 1982 and 1987
Firms Without Employees
Firms With Employees
Percent Change,
Percent Change,
1987
1982-1987
1982
1982-1987
1982
1987
USTOTal
311662
618198
98.4%
2300959 3496589
520
51,627
66.3
111.1
31,045
4,405
9,297
Connecticut
12,780
19,919
55.9
4,003
136.4
1,693
69.0
Maine
154.4
57,703
97,491
Massachusetts
5,459
13,885
141.3
7,001
12,029
71.8
Rhode Island
1,031
2,488
10,529
18,858
79.1
New Hampshire
3,855
178.7
9-21-92 15:11 ; NRCC CAMPAIGN DIV!-
1,383
11,294
62.5
129.5
6,951
1,093
2,508
Vermont
97,964
80.6
8,997
19,389
115,5
54,246
New Jersey
155,195
241,183
55.4
New York
21,290
43,729
105.4
921
117.1
4,881
7,945
62.8
1,782
8,133
9,757
20.0
Delaware
District of Columbia
760
1,230
61.8
10,288
114.5
43,574
71,603
64.3
Maryland
4,797
87.7
92,506
141,731
53.2
Pennsylvania
13,653
25,631
50,547
80,661
59.6
13,755
117.1
Virginia
6,335
59.7
13,433
18,881
40.6
West Virginia
1,297
3,668
38,834
48.0
98.7
26,235
4,621
9,184
181,865
67.4
Alabama
135.7
108,637
Florida
16,755
39,496
73,591
58.5
14,459
112.0
46,433
167
6,821
2024566218:# 8
Georgia
Percent Change,
1982-1987
41.6
36.0
57,1
50.6
46.6
56.4
39.0
50.6
51:1
46.2
51.5
39.9
43.5
51.5
24.8
44.2
43.7
41.8
57.3
37,2
49.6
32.5
37.8
37,2
49.1
22.8
64.9
52,6
46,5
54.1
38.5
34.2
39.7
45.7
1987
44,859
22,867
78,366
35,080
56,280
151,593
73,378
115,393
75,769
132,077
56,993
29,054
47,466
21,215
55,081
257,717
44,992
46,323
74,200
27,237
76,661
14,491
10,421
11,141
25,925
8,803
51,620
486,657
19,292
15,962
12,047
15,897
49,412
77,067
Women-Owned Businesses with and without Paid Employees by SBA Region and State, 1982 and 1987-Continued
Firms Without Employees
1982
31,670
16,814
49,693
23,295
38,389
96,898
152,805
76,626
50,147
6EF 05
37,625
20,764
33,088
14,004
44,143
178,732
31,313
32,679
47,180
19,857
51,257
10,937
7,561
8,121
17,388
7,166
31,306
318,811
13,167
10,355
8,699
11,846
35,368
52,887
Percent Change,
1982-1987
75.8
69.8
102.7
100.1
78.6
90.3
79.9
76.7
103.2
80.7
962
73.4
60.4
83.2
70.5
92,2
79.8
75.6
95.0
74.7
108.6
78.4
87.6
79.2
130.7
62.4
136.8
104.1
926
117.2
144.2
97.6
86.4
106.2
Firms With Employees
1987
8,595
6,109
15,166
7,524
11,168
25,464
16,571
18,565
12,368
22,007
12,192
6,415
8,386
4,182
8,609
40,421
8,600
7,182
13,458
5,048
12,750
3,256
2,268
2233
3,885
1,993
6,947
73,164
1077
2,869
1,929
3,076
9,529
13,218
1982
4,888
3,597
7,401
3,760
6,254
13,380
9,210
10,507
6,087
12,180
6,768
3,699
5,227
2,283
5,050
21,026
4,784
4,091
6,900
2,889
6,173
1,825
1,209
1,246
1,684
1,227
3,779
35,851
3,240
1,321
06/
1,557
5,111
60/9
Saurce: Adapted by the U.S. Small Business Administration, Office of Advocacy, from the 0.5. Department of Commerce, Bireau of the Census,
Women Owned Businesses, 1987 (Washington, D.C.: U.S. Government Printing Office, 1990), Table 2 2
Kentucky
Mississippi
North Carolina
South Carolina
Tennessee
Illinois
Indiana
Michigan
Minnesota
Ohio
Wisconsin
Arkansas
Louisiana
New Mexico
Oklahoma
Texas
lowa
Kansas
Missouri
Nebraska
Colorado
Montana
North Dakota
South Dakota
Usah
Wyoming
Arizona
California
Hawaii
Nevada
Alaska
Idaho
Oregon
Washington
168
6
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6218
OFFICE NUMBER 2930
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SBA
U.S.Small Business
Aministr ation
SBA number
For More Information, Contact:
92-63
Mike Stamler
September 24, 1992
(305) 870-6003
8BA NEW "GREEN LINE" CREDIT PROJECT CAN IMPROVE ACCESS
TO WORKING CAPITAL FOR FLORIDA'S SMALL BUSINESSES
MIAMI, Fla. -- An innovative and revamped revolving credit
program test-marketed in New England for the past 18 months will
be made available in south Florida to help commercial lenders
deal with the working capital needs of small businesses
devastated by Hurricane Andrew, U.S. Small Business
Administration (SBA) Administrator Patricia Saiki said today.
The program, the Green Line, provides SBA guarantees on
lines of credit of up to five years extended by commercial
lenders to small businesses. Under the Green Line Program, SBA
can provide guarantees on up to 85 percent of revolving credit
lines up to $750,000 to small businesses that cannot otherwise
get such financing.
"Commarcial credit -- in particular reliable shorter-term
credit -- was very difficult to get for small businessas even
before Hurricane Andrew hit," said Saiki.
"NOW, a month after the storm struck, the need for liquidity
is that much greater, and people and businesses are suffering,"
she said. "The extraordinary needs of the area require a certain
degree of creativity, and that's what we're going to do."
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The Green Line is designed to secure financing to cover the
revolving credit needs inherent in the manufacturing and
contracting process, especially financing receivables to bridge
the payment cycle between production and payment for goods and
services delivered.
"The Green Line can help lead the way in rebuilding this
region's economy and assist financial institutions, small
businesses and their employees get back up on their feet," she
said.
"The Green Line will help preserve jobs and create new ones
and give the citizens of South Florida access to the financial
tools they need to rebuild their economy," Saiki said. "I am
very optimistic about this project, and I believe we will see the
first fruits of this effort in the next six weeks."
"This program will help keep businesses open, get their
employees working again and help manufacturers and contractors
get the financing they need to produce and deliver their
products," Saiki said.
A revolving line of credit allows a borrower to obtain funds
as needed from a pre-approved credit account and repay the
borrowed funds on a regular repayment schedule. It is designed
to help small businesses finance their accounts receivable and
inventory, and allows continuous borrowing and repayment during
the makimum five-year period of the loan,
An early version of the program was launched as & pilot
project in New England in May 1991, and was made available
through landers with experience in asset-based lending.
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Administrator saixi has expanded it to include states in SBA
Regions IV and VI. Besides Florida, Region IV includes Alabama,
Georgia, North carolina, South Carolina, Tennessee, Kentucky and
Mississippi. Region VI includes Texas, New Mexico, Louisiana,
Oklahoma and Arkansas.
The SBA guarantee severs up to as percent or $750,000 --
whichever is less - of the credit line. Maximum credit limits
for individual loans will be set according to a formula based on
80 percent of the value of accounts receivable and 50 percent of
the value of inventory, with repayment schedules based on the
collection of receivables.
The borrower's inventory and accounts receivable are pledged
collateral, Interest rates are negotiable between lenders and
as borrowers, but cannot be more than 2.75 percentage points over
the prime rate.
The SEA'S definition of amall businesses includes more than
99 percent of the businesses in the United States. To see if you
qualify, or for more information about the program, contact your
nearest SBA District office's finance division. The office
nearest to the declared Hurricane Andrew disaster area is in
Coral Gables (305)563-5533.
The Green Line Project is unrelated to SEA's Disaster
Assistance Loan Program, which has been making hurricane recevery
loans to South Florida businesses, homeowners and renters since
Aug. 26.
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