Small-business people in New England say tax reform must not dump incentives

By , Staff writer of The Christian Science Monitor

Ten or 20 years ago, few listened to the voice of small business. Not so, today. Because of the recent recognition of the large part that small business plays in the growth of the economy, what is good for small business is considered important. Between 1980 and 1982, small businesses made a net contribution of more than 2 million jobs to the work force, according to ``The State of Small Business: a Report of the President,'' released in March of 1984.

``It has become more of a recognized sector with its own concerns,'' says Carolyn VanSant of the Small Business Association of New England (SBANE).

One of the biggest concerns of small businesses -- at least in New England, a hot growth region for small business in recent years -- is tax reform and what it might do to the precarious prosperity of many companies.

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A recent survey cosponsored by SBANE and Ernst & Whinney, the accounting firm, polled 1,800 SBANE and 400 company members of the Massachusetts High Technology Council to find out the attitude of small business toward the major tax reform package proposals.

The three main tax reform proposals before Congress -- the Treasury plan (now under revision) and the Bradley-Gephardt (FAIR) and Kemp-Kasten (FAST) proposals -- would dump most of those tax incentives.

New England small business opposes this.

The burgeoning of small business in recent years has been fueled in part by tax incentives, notes James G. Maguire, head of the Boston office of Ernst & Whinney.

Small businesses tend to be labor intensive, says Lewis A. Shattuck, executive vice-president of SBANE, so tax credits that encourage job creation and training are important to them.

Similarly, the investment tax credits and retention of the graduated tax for small corporations are important to the survey respondents.

But self-interest is not the only motivating factor. There is across-the-board support for credits that are often thought of as industry-specific. For example, strong support for research-and-development tax credits comes from a majority of service firms.

At present, one of the few advocates for small business in Washington, the Small Business Administration, is under attack by critics who say it is not doing an important enough job to warrant being a multibillion-dollar federal agency. SBANE, defending the SBA, contends that many of statistics advanced in the attack by White House budget chief David Stockman are suspect. It says he relied heavily on reports by the conservative Heritage Foundation.

As they attempt to reduce the budget deficit, Washington lawmakers are considering a number of proposals relating to SBA funding. The Senate is examining a plan to abolish SBA management and loan assistance to small businesses, and to transfer procurement assistance, advocacy, women's, and minority management assistance to the Commerce Department, says Ms. VanSant.

SBANE supports a bill by Sen. Lowell P. Weicker Jr. (R) of Connecticut, chairman of the Senate Small Business Committee. The bill would freeze SBA spending for three years, enabling the agency time to examine all its programs. The bill preserves all its programs except direct lending.

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