This week, the Administrator of the Small Business Administration (SBA), along with Ivanka Trump, hosted small businesses at the White House to talk about the “dreamers and innovators” who power our economy.
The event began with opening remarks by President Trump, who highlighted the impact of small businesses on our economy, and emphasized his efforts to help them grow– namely, eliminating regulations and comprehensive tax reform. Before concluding, the president stated that through his administration’s efforts, we will see new jobs being created and will “unleash a new era of American prosperity, perhaps like we’ve never seen before.”
The focus of the discussion between Administrator McMahon and Ivanka Trump was about how the SBA helps small businesses, beyond providing access to capital. Administrator McMahan called the SBA the country’s best kept secret, and will be focused on ensuring that more business owners can access the range of SBA’s programs and assistance. This includes loans, but also counseling and mentoring, assistance with government contracting, and disaster relief. She also mentioned that the SBA will be releasing a new marketing campaign with a new logo and messaging during National Small Business Week in 2018.
Both Administrator McMahon and Ivanka Trump reiterated the president’s commitment to reducing regulations and taxes. These appear to be the administration’s primary vehicles for assisting small businesses. While it is true that regulations can be difficult to navigate and expensive, we know that for many small businesses, this is not among the top concerns.
Although both referred to the importance of capital access, neither cited any policy efforts to increase safe and affordable financing for small businesses. For “Main Street” and underserved small businesses, this is the primary concern.
In fact, the president’s budget actually significantly cuts programs that have a direct impact on small businesses access to capital and other resources such as counseling. The president’s proposed Fiscal Year (FY) 2018 budget eliminated funding for the CDFI Fund programs. These programs provide critical funding for organizations that provide financing to small business, for housing, and other community facilities. Zeroing out these funds would take away a key vehicle for delivering capital and investment to the very businesses that the administration seeks to assist. Funding for CDFI Fund programs was partially restored in the budget passed by the House Financial Services & General Government (FSGG) Appropriations Subcommittee, which included $190 million for the CDFI Fund (a 23 percent decrease from FY17).
The SBA’s budget was also cut by 5 percent, or $43.2 million, in the president’s budget. Although Administrator McMahon and Ivanka Trump spoke highly of these programs, $12 million was a cut to technical assistance grants. And funding for microloans, which are critical for expanding access to capital for underserved markets, would be cut by 20 percent.
It is also not likely that most small businesses would benefit from a corporate tax cut. The president has proposed a decrease from 35 percent to 15 percent. But as Politico reports, analysis by the Tax Policy Center shows that this cut would primarily benefit the wealthiest Americans. Currently, almost 70 percent of small businesses already pay taxes at a marginal rate of 15 percent or lower, so a tax rate cut will not help them. The top earners among small businesses, however, will see a benefit. These businesses earn 50.8 percent of all small business income, and the top 0.1 percent earned 22.8 percent. These are the people who will reap the benefits of a tax cut, not your typical mom-and-pop “Main Street” business.
Small businesses really are our nation’s job creators, innovators, and dreamers. There are ways that our policies and programs can serve them better, in order to “unleash” their full potential. Creating a conducive regulatory environment is one way, and ensuring a fair and level tax system is another. But these alone will not help most small businesses; in fact, the other efforts of the administration to undermine programs that work will have detrimental effects that far outweigh anything else.