[Congressional Record Volume 143, Number 75 (Wednesday, June 4, 1997)]
[House]
[Pages H3440-H3442]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      NATIONAL SMALL BUSINESS WEEK

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 7, 1997, the gentleman from Colorado Mr. Bob Schaffer is 
recognized for 30 minutes as the designee of the majority leader.
  Mr. BOB SCHAFFER of Colorado. Mr. Speaker, June 1 through 7 is 
recognized throughout the country as National Small Business Week. I 
cannot think of a more worthy group to honor. Small business is the 
heart of not only our economy but of our communities. I hope that my 
colleagues here in the Congress will be participating in events in 
their districts to honor this vital sector of our economy.
  Small business is the engine not just of our Nation's economy but of 
our communities. Typically it is the small business people who are the 
charitable and civic leaders in our neighborhoods. Small business 
accounts for 99.7 of the Nation's employers, employing 53 percent of 
the private work force, contributing 47 percent of all sales in the 
country, and responsible for 50 percent of the private gross domestic 
product.
  Yet small business owners face a tax and regulatory system that 
overburdens and demoralizes them. Government is meant to be the servant 
of the people. Yet the existing Federal tax and regulatory state 
unfairly acts as judge, jury, and master of honest, hard-working 
Americans.
  In the last 2 years, Congress has passed legislation that helps small 
business struggle from under the thumb of the Federal Government, the 
Small Business Regulatory Enforcement Fairness Act and Regulatory 
Flexibility Act, to name a few.
  However, there is still a long way to go. This Congress is dedicated 
to championing legislation designed to encourage small business growth 
and prosperity, and I am dedicated to becoming one of its chief 
advocates.
  Mr. Speaker, I insert the following for the Record.
                                         House of Representatives,


                                  Committee on Small Business,

                                     Washington, DC, June 1, 1997.
       Dear Republican Colleague: June 1-7, 1997, has been named 
     National Small Business Week. I can't think of a more worthy 
     group to honor. Small business is the heart not only of our 
     economy, but of our communities. I hope that you will be 
     participating in events in your district to honor this vital 
     sector of our economy.
       To help you prepare for these events, I have attached some 
     small business information that might be useful for events 
     and speeches: Small Business Talking Points; Small Business 
     Facts; Fact Sheet on Small Business Regulatory Enforcement 
     Fairness Act and how small business can utilize the new law; 
     Talking Points on H.R. 1145, the ``Home-Based Business 
     Fairness Act''; and articles on the impact of red tape on 
     Women-Owned Businesses and the impact of the ``Death Tax'' on 
     small business.
       I hope you will find this information useful in honoring 
     small business. If you have any questions or would like more 
     information, please contact the Committee on Small Business 
     at x5-5821.
           Sincerely,
     Jim Talent,
       Chairman.

                     Small Business Talking Points

       Small business is the engine--not just of our nation's 
     economy--but of our communities. Typically, it is small 
     business people who are the charitable and civic leaders in 
     their neighborhoods.
       Small business accounts for 99.7 percent of the nation's 
     employers, employing 53 percent of the private work force, 
     contributing 47 percent of all sales in the country, and 
     responsible for 50 percent of the private gross domestic 
     product.
       Yet, small business owners face a tax and regulatory system 
     that overburdens and demoralizes them. Government is meant to 
     be the servant of the people, yet the existing federal tax 
     and regulatory state unfairly acts as judge, jury, and master 
     of honest, hard-working Americans.
       In the last two years, Congress has passed legislation that 
     helps small business struggle from under the thumb of the 
     federal government--the Small Business Regulatory Enforcement 
     Fairness Act and the Regulatory Flexibility Act--to name a 
     few. However, there is still a long way to go. This Congress 
     is dedicated to championing legislation designed to encourage 
     small business growth and prosperity, and I am dedicated to 
     becoming one of its chief advocates.
       Paperwork Elimination. One of the first bills brought 
     before the House in the 105th Congress, the Paperwork 
     Elimination Act was designed to require federal agencies to 
     communicate with small businesses and individuals through 
     information technology. This bill makes electronic 
     communications voluntary for businesses, but mandatory for 
     the government. We are returning the responsibility of 
     compliance back to the federal government--instead of the 
     business owners.
       Mandatory Electronic Filing Tax Payment System (EFTPS). A 
     perfect example of federal regulatory tyranny is the 
     impending mandate on small business to comply with the EFTPS. 
     The system requires any business with payroll taxes in excess 
     of $50,000 to file electronically. On June 1, 1997, the IRS 
     succumbed to small business pressure and granted a six-month 
     waiver of the 10% penalty. However if businesses do not 
     comply by December 31, 1997, they will be subject to 
     penalties. Although the extension is a solid victory, small 
     business compliance with EFTPS is still outrageous. That is 
     why we have introduced a bill to make compliance for small 
     business voluntary. The Small Business Tax Payment Relief Act 
     will return the onus to the federal government instead of the 
     small business owner.
       Tax Relief. Small businesses face an unfair tax burden. We 
     are pleased that the budget agreement will include 
     significant small business tax relief. It is vital that any 
     tax package include these and other provisions for small 
     business. The following are a few of the provisions that we 
     are pushing for:
       Death tax. The death tax, a.k.a. the estate tax, is levied 
     on individuals who receive property from deceased family 
     members. It is inconceivable that after paying taxes on a 
     business for years, children must then pay again after the 
     death of their parents. Many families must resort to selling 
     the family business in order to pay the estate taxes. The 
     result is tangible: more than 60 percent of small businesses 
     cease before reaching the second-generation and more than 90 
     percent of small business fail to reach the third generation.
       Capital gains. Capital gains taxes income twice and hurts 
     many small firms that rely on venture and equity capital from 
     investors--including millions of informal investors such as 
     family, friends and employees--to survive. Lowering capital 
     gains will benefit small business by unleashing capital for 
     investment in and by small entities. This will enable them to 
     innovate, grow, create jobs, increase wages, save and invest 
     more, and spur economic growth.
       Independent contractor classification. Pegged by the White 
     House Conference on Small Business as one of the most 
     important issues facing small businesses, redefining the 
     independent contractor status will clarify the complex 
     classification process. It will stop the IRS from 
     retroactively penalizing legitimate business arrangements and 
     let small businesses prosper.
       Home office deduction. There are 14 million Americans who 
     now operate home-based businesses. Corporate downsizing, 
     improvements in technology, and a desire to be close to 
     family have led to the growing number of home offices. We 
     should do everything we can to allow families to work closer 
     to home. That is why we need to restore the home office 
     deduction.
       Increased Health Deductability for the Self-Employed. It is 
     patently unfair that large corporations can deduct 100 
     percent of their share of employees' health-care costs, while 
     the self-employed farmer or home-business owner can only 
     deduct 40 percent. Last year's health insurance bill 
     increased health insurance deductibility to 80 percent by 
     2006, but that still is not good enough. We need to level the 
     playing field and offer small businesses the same benefits 
     larger corporations enjoy.
       Small business is vital to our nation's economy. For too 
     long, small business has had to fight the tyranny of a 
     federal government that claims to support small business, yet 
     instead support regulatory agencies and a tax system that 
     stand in the way of small business success. It's time for 
     change. It's time to give small business its due and return 
     government to a supportive role--not an antagonistic one.
                                                                    ____


                          Small Business Facts


                          role in the economy

       The number of new businesses catapulted in 1995. There were 
     an estimated 800,000 new businesses last year--the highest 
     ever--and a 5 percent increase over the 1994 record of 
     742,000 new businesses. Interest in starting and owning a 
     small business has skyrocketed in the last three years, and 
     part-time entrepreneurs have increased steadily in the past 
     decade.
       In the United States, small businesses have increased 49 
     percent since 1982. As of 1994, there were approximately 22.1 
     million non-farm businesses, of which 99 percent are small by 
     size standards set by the U.S. Small Business Administration 
     (SBA). These include partnerships, corporations, and sole 
     proprietorships. Most of the 22 million businesses--almost 
     two-thirds operate full-time--the rest part-time.
       There is nothing small about starting or owning a small 
     business in the United States. They account for 99.7 percent 
     of America's employers. Small businesses employ 53 percent of 
     the private work force, contribute 47 percent of all sales in 
     the country, and are responsible for 50 percent of the 
     private gross domestic product. Industries dominated by small 
     businesses produced an estimated 62 percent of the 3.3 
     million new jobs created during 1994.

[[Page H3441]]

                  women and minority-owned enterprises

       According to a 1995 study by the National Foundation for 
     Women Business Owners and Dun and Bradstreet, there are now 
     7.7 million women-owned firms that provide jobs for 15.5 
     million persons, more than the number of persons employed in 
     the Fortune 500 industrial firms.
       Data on women and African American-owned businesses for 
     1987 and 1992--the latest data that is available from the 
     Department of Commerce--reveals that these businesses fared 
     well in the late 1980s. The number of women-owned businesses 
     rose from 4,112,787 to 5,888,883 between 1987 and 1992--an 
     increase of about 43 percent. The total receipts of women-
     owned businesses nearly tripled over this same time period, 
     rising from $278.1 billion in 1987 to 642.5 billion in 1992.
       Women owned 32.1 percent of all businesses in the United 
     States in 1992--raising the total number of women-owned firms 
     to 6.4 million. In 1994, women-owned firms comprised 32.7 
     percent of all U.S. businesses. The SBA predicts that by the 
     beginning of the 21st century, women will own 50 percent of 
     the small businesses in the United States.
       Between the years of 1987 and 1992, the number of African 
     American-owned businesses rose by 46 percent, from 424,165 to 
     620,912. As of 1992, the receipts of black-owned businesses 
     totaled $32.2 billion, which is almost double the receipts in 
     1987.
       One of the fastest growing segments of the U.S. business 
     population during the 1980s proved to be Hispanic-owned 
     business. Between 1982 and 1987, the latest years available, 
     the number of Hispanic-owned businesses rose from 233,975 to 
     422,373, an increase of 80.5 percent. The total receipts from 
     Hispanic-owned firms rose in 1987--from $11.8 billion in 1982 
     to $24.7 billion.
       Between 1982 and 1987, businesses owned other minorities--
     Asian Americans, American Indians, and others--increased by 
     87.2 percent. This was the fastest increase of all the 
     minority business groups surveyed by the Bureau of the Census 
     for those years.


                               employment

       Most recently, employment in the small business sector has 
     again reached high levels. Between December 1994 and December 
     1995, employment in small business-dominated industries 
     increased 2.7 percent, creating 1.25 million new jobs, or 75 
     percent of total new jobs in the economy. Based on Dun and 
     Bradstreet data, virtually all new jobs were generated by 
     small firms with fewer than 500 employees from 1990-1994. 
     During the 1990-1994 period, there were about 4.2 million new 
     jobs added to the economy.
       Restaurants, outpatient care facilities, physicians' 
     offices, special trade construction contractors, computer and 
     data processing services, credit reporting and collection 
     firms, medical and dental laboratories, day care providers, 
     and counseling and rehabilitation services are the fastest 
     growing sectors of small business-dominated industries during 
     recent years.
       According to the latest projections, small firm-dominated 
     sectors will contribute about 60 percent of new jobs from 
     1994-2005. Almost 88 percent of these jobs will be in retail 
     trade or services. Small firms are most likely to generate 
     jobs that will be filled by younger workers, older workers 
     and women. Many of these workers prefer or are only able to 
     work on a part-time basis, and thus can be easily 
     accommodated by small employers.
       Small businesses provide about 67 percent of initial job 
     opportunities and are responsible for the majority of initial 
     training in basic skills.


                         sources of innovation

       According to recent data, small firms produce 55 percent of 
     innovations. Small firms generate twice as many product 
     innovations per employee as large firms, including the 
     employees of firms that do not innovate. Small firms obtain 
     more patents per sales dollar, even though large firms are 
     more likely to patent a discovery, implying that small firms 
     have more discoveries.
       The airplane, audio tape recorder, double-knit fabric, 
     fiber optic examining equipment, heart valve, optical 
     scanner, pacemaker, personal computer, soft contact lenses, 
     and the zipper are among the important innovations by U.S. 
     small firms in the 20th century.


                           main street impact

       The establishment of a small business has a large, positive 
     effect on the local economy. A small business with 100 
     employees in a town adds: 351 more people; 79 more school 
     children; 97 more families; $490,000 more bank deposits; one 
     more retail establishment; $565,000 more retail sales per 
     year and $1,036,000 more personal income per year.
       Small businesses also seem to be more community minded. 
     They give more in charity to community service organizations 
     per employee than do large businesses, according to the SBA's 
     Office of Advocacy. In addition, small firms tend to target 
     their donations to direct service providers.


                         job growth & training

       During the entire 1976-1990 period, small firms (with less 
     than 500 employees) provided 53 percent of total employment 
     and 65 percent of new jobs. From 1989-1991, the latest Census 
     data available produced under contract for the SBA, indicated 
     that small firms with 0-4 employees created 95 percent of the 
     new jobs. Of the 2.6 million new jobs created, 1.5 million 
     came from expansions of new small firms with 0-4 employees 
     that moved into the 5-19 employees size category. The 
     remaining jobs came from births of new small firms.
       According to the Bureau of Labor Statistics, nearly three-
     fourths (71 percent) of future employment in the nation's 
     fastest growing industries (health services and business 
     services) is likely to come from small firms. By 2005, 7.2 
     million jobs will be created by these fast-growing 
     industries, with small firms contributing 5.2 million.


                            earnings growth

       The most recent income statistics available (from 1994) 
     indicate gains in earnings for small businesses. The earnings 
     of partners and sole proprietors increased 7.2 percent to 
     $434.2 billion, increasing $30.0 billion from 1993.
       According to a Price Waterhouse study, businesses receiving 
     loan guarantees from the SBA experienced higher growth rates 
     in sales and employment than other comparable small 
     businesses.
                                                                    ____


         The Small Business Regulatory Enforcement Fairness Act

       Requires agencies to publish compliance guides in ``plain 
     English'' and to develop a policy to answer inquiries of 
     small businesses seeking advice about regulatory compliance.
       Directs agencies to develop programs to answer inquiries of 
     small businesses seeking information on and advice about 
     regulatory compliance.
       Allows small businesses to sue federal agencies for 
     violating the Regulatory Flexibility Act. The Regulatory 
     Flexibility Act requires, in part, that agencies determine 
     whether a proposed rule will have a significant impact on 
     small entities and that they act to minimize such impact.
       Requires EPA and OSHA to collect advice and recommendations 
     from small businesses, through the SBA's Chief Counsel for 
     Advocacy, when creating proposed rules which will have a 
     significant economic impact on small businesses.
       Creates an SBA Ombudsman to collect feedback from small 
     businesses through Regional Small Business Regulatory 
     Fairness Boards, and rate federal agency responsiveness to 
     small business.
       Directs agencies to develop policies to waive or reduce 
     penalties for noncompliance by small businesses in certain 
     circumstances.
       Allows parties which do not prevail in a case against an 
     agency to recover a portion of their attorney fees if the 
     original agency demand was unreasonable and substantially in 
     excess of the final outcome of the case.
       Creates a 60-day major rule ``review period'' during which 
     Congress may pass a resolution and, with either the signature 
     of the President or by overriding a veto, strike down the new 
     regulation.


           how a small business can take advantage of sbrefa

       Contact the Regional Small Business Regulatory Fairness 
     Board to express concerns regarding agency enforcement 
     activities.
       Contact the SBA Office of Advocacy to offer advice and 
     recommendations concerning rules in development by EPA and 
     OSHA.
       Seek judicial review of an agency's failure to comply with 
     the Regulatory Flexibility Act.
       Utilize ``plain English'' compliance guides published by 
     agencies.
       Consult agencies concerning the conduct required to be in 
     compliance.
                                                                    ____


    Relieving the Tax Burden on Our Home-Based Businesses and Women 
                        Entrepreneurs--H.R. 1145

       We must relieve the tax burden on our small, family and 
     home-based entrepreneurs--millions of them women--who are 
     working hard to create jobs and economic opportunity for 
     themselves and others in our communities.
       Small businesses create two of every three net new jobs in 
     this country. Of the roughly 5.5 million employers in the 
     U.S., about 99% of them are small employers. Almost 90 
     percent of them employ fewer than 20 employees. Because they 
     invest in people, high tax rates and complex tax rules impact 
     small businesses most heavily.
       Millions of small entrepreneurs are living the American 
     dream of owning a business and working hard to make it 
     succeed.
       There are not more than 9 million home businesses, and over 
     14 million Americans earning income from a home business.
       The majority of these businesses are created and owned by 
     women. In fact, the SBA estimates that women start over 
     300,000 new home businesses in our country each year.
       Staying close to family and our neighborhoods, courageous 
     men and women are breaking through barriers to work and 
     creating jobs--jobs that give parents greater freedom and 
     flexibility to balance and care for their children's needs.
       While the explosion in technology is facilitating home 
     businesses, our tax code's outdated and unfair rules are 
     hindering them.
       H.R. 1145 provides common sense tax relief for home 
     businesses and self-employed entrepreneurs--the fastest 
     growing and most dynamic sectors of our economy.
       As a simple matter of fairness, H.R. 1145 allows self-
     employed workers to deduct the expenses of a home office and 
     100% of their health-insurance costs.
       There is no good reason why hard-working self-employed 
     Americans should be denied the same opportunity all other 
     employers have to deduct their office expenses and the full 
     cost of health insurance. Currently, 5.1 million self-
     employed heads of households

[[Page H3442]]

     and their dependents--1.4 million of them children--are 
     uninsured.
       H.R. 1145 also provides a simple and clear definition of an 
     independent contractor to help small entrepreneurs avoid 
     crippling IRS audits and fines. Between 1988 and 1994, the 
     IRS audited 11,000 businesses, reclassified 438,000 workers 
     as employees, and imposed back taxes and penalties totaling 
     $751 million on businesses under its subjective and outdated 
     ``20-factor'' test.
       Small businesses need H.R. 1145's fair, objective and safe 
     test for providing and receiving the services of independent 
     contractors.
       All 30 Regional Tax Chairs and Regional Human Capital 
     Chairs representing the 2000 delegates to the 1995 White 
     House Conference on Small Business have endorsed H.R. 1145 
     because it ``sets a clear standard to provide safety to law-
     abiding small businesses while protecting the rights of 
     legitimate employees.''

                          ____________________