[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
MAKING WASHINGTON WORK FOR AMERICA'S SMALL BUSINESSES
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
MARCH 22, 2017
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 115-010
Available via the GPO Website: www.fdsys.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
24-673 WASHINGTON : 2017
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
TRENT KELLY, Mississippi
ROD BLUM, Iowa
JAMES COMER, Kentucky
JENNIFFER GONZALEZ-COLON, Puerto Rico
DON BACON, Nebraska
BRIAN FITZPATRICK, Pennsylvania
ROGER MARSHALL, Kansas
VACANT
NYDIA VELAZQUEZ, New York, Ranking Member
DWIGHT EVANS, Pennsylvania
STEPHANIE MURPHY, Florida
AL LAWSON, JR., Florida
YVETTE CLARK, New York
JUDY CHU, California
ALMA ADAMS, North Carolina
ADRIANO ESPAILLAT, New York
BRAD SCHNEIDER, Illinois
VACANT
Kevin Fitzpatrick, Staff Director
Jan Oliver, Chief Counsel
Adam Minehardt, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Steve Chabot................................................ 1
Hon. Brad Schneider.............................................. 2
WITNESSES
Ms. Maxine Turner, Founder, Cuisine Unlimited, Salt Lake City,
UT, testifying on behalf of the U.S. Chamber of Commerce....... 5
Ms. Ann Chambers, Co-Founder and CEO, Red212, Cincinnati, OH,
testifying on behalf of Women Impacting Public Policy.......... 6
Mr. Rutland ``Skip'' Paal, Owner, Rutland Beard Floral Group,
Baltimore, MD, testifying on behalf of the Society of American
Florists....................................................... 8
Mr. David Borris, Owner, Hel's Kitchen Catering, Northbrook, IL,
testifying on behalf of the Main Street Alliance............... 9
APPENDIX
Prepared Statements:
Ms. Maxine Turner, Founder, Cuisine Unlimited, Salt Lake
City, UT, testifying on behalf of the U.S. Chamber of
Commerce................................................... 23
Ms. Ann Chambers, Co-Founder and CEO, Red212, Cincinnati, OH,
testifying on behalf of Women Impacting Public Policy...... 30
Mr. Rutland ``Skip'' Paal, Owner, Rutland Beard Floral Group,
Baltimore, MD, testifying on behalf of the Society of
American Florists.......................................... 38
Mr. David Borris, Owner, Hel's Kitchen Catering, Northbrook,
IL, testifying on behalf of the Main Street Alliance....... 44
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
MAKING WASHINGTON WORK FOR AMERICA'S SMALL BUSINESSES
----------
WEDNESDAY, MARCH 22, 2017
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 11:00 a.m., in Room
2360, Rayburn House Office Building, Hon. Steve Chabot
[chairman of the Committee] presiding.
Present: Representatives Chabot, Luetkemeyer, Kelly, Blum,
Bacon, Evans, Murphy, Lawson, Clarke, Adams, Espaillat, and
Schneider.
Chairman CHABOT. Good morning. I call this hearing to
order. And I want to thank everyone for being here. We
especially appreciate the witnesses' time being taken from
their businesses, and very significant ones at that. So we
really do appreciate your testimony.
And for those of you who follow our Committee, you know how
relentless we are in our advocacy for America's 28 million
small businesses. We constantly remind folks about how
important small businesses are to the American economy. We
remind people that they make up 99 percent of all firms; that
48 percent of the people working today work for a small
business; that they account for 46 percent of our gross
national product. We do this because it is important. We have
to continue to shout it from the rooftops because too often
some folks here in Washington take small businesses for
granted.
Take, for instance, the implementation of the Affordable
Care Act, or Obamacare. Small business witness after small
business witness has come before us, and constituent after
constituent back home, and stated how unworkable the whole
thing is. We hear stories of astronomical premium increases,
severely limited choices, and little to no assistance for small
businesses trying to help themselves to get insurance or to
their employees. Yet, there are folks out there who think that
Obamacare is working just fine. Well, it is not, and small
businesses are usually the ones left holding the bag.
Another problem that continually hinders small business
growth is the avalanche of unnecessary and unworkable
regulations. Because of the unique role small businesses have
in the economy, regulations have a substantially higher impact
on them than they do on larger business entities. In fact, a
recent study by the National Association of Manufacturers found
that small firms pay an average of $2,041 more per employee per
year than their larger counterparts.
It does not get any easier for small businesses in the tax
realm either. A study by the Small Business Administration's
Office of Advocacy disclosed that small firms pay 67 percent
more to comply with the Tax Code than do large firms. The
growing number of tax provisions, along with the fact that
small firms frequently do not have an in-house accountant or
tax attorney means that small business owners must hire outside
experts or add duties to another employee's work load, which
that takes time away from their actual contribution towards the
business because they just have to figure out the tax burden.
These issues are important because too often small businesses
get the short end of the stick, which is counterproductive to
the economic health of our Nation.
This hearing is a little bit different than others that we
have done. Instead of focusing on just one topic as we usually
do, we simply asked the witnesses to give us advice on the
policies and initiatives that we could be focusing on to help
them the most. By getting input now, we can focus our efforts
throughout the 115th Congress to serve our constituency, which
are small businesses, as responsibly and as effectively as
possible.
We have an excellent panel, as I mentioned before of
witnesses here today, and I again want to make note of how
important it is that you are all with us.
And I would now like to yield to the gentleman from
Illinois, Mr. Schneider. Ms. Velazquez, who is usually here, is
unable to be here this morning, so Mr. Schneider is filling in.
Mr. SCHNEIDER. Thank you, Mr. Chairman. Thank you for
calling this hearing. I, too, want to thank the witnesses for
taking the time to be here.
There are nearly 30 million small businesses in the United
States representing more than 99 percent of all businesses.
These small firms employ nearly 50 percent of all private
sector employees in the United States. At the same time, 1 out
of every 10 Americans are self-employed, and another 7 percent
of American workers are actively trying to start a business.
These trailblazers, both new entrepreneurs and small growing
firms, animate the American economy. They take great risks by
launching new ventures, developing new products, establishing
new industries, and ultimately spurring job growth.
As we look to foster and encourage this type of risk-taking
and entrepreneurship, there are a range of policy areas that
come into play. Federal regulation, for example, is a
fundamental tool of government used to implement public policy.
They serve to protect workers and clarify how our Nation's laws
are implemented. Most regulations serve an important purpose,
like ensuring food is safe to eat and our air and water remain
unpolluted. In fact, according to a recent poll by the American
Sustainable Business Council, Main Street Alliance, and the
small business majority, 86 percent of small business owners
see regulations as a necessary part of our modern economy.
Of course, we must always be mindful of the burdens and
compliance costs certain regulations impose on smaller
companies, but we also must bear in mind that regulations and
regulatory certainty are needed to protect the public health
and can even be necessary for economic growth.
Just as regulations are part of a thriving and modern
economy, so is accessibility to affordable quality health
insurance. Seven years ago, President Obama signed into law the
Affordable Care Act. Since then, about 22 million people have
secured coverage. These gains have been significant for small
business employees as their uninsured rate fell from 27 percent
to less than 20 percent between 2013 and 2015.
The Congressional Budget Office estimates that the
Republican Healthcare Bill, or Trumpcare, would rip away health
insurance from 14 million Americans in the first year alone.
That number jumps to 24 million over a decade, nearly doubling
the share of Americans who are uninsured.
And of particular note for small employers is the
elimination of the Small Business Health Care Tax Credit.
Rather than improving this provision to make it work better for
small firms, Trumpcare simply eliminates it.
Slash-and-burn proposals like this leave little optimism
for making bipartisan headway in other areas like tax reform.
That is unfortunate because I think everyone on this Committee
agrees on the need for reforming our Tax Code. Simplifying the
Tax Code would give small businesses greater certainty and
allow them to spend their time and resources on what they do
best: creating new jobs in their own local communities.
I am grateful that we are here today to learn how Congress
can serve the needs of small businesses and entrepreneurs so
they can help grow our economy. The difficulty will be
identifying tangible, bipartisan solutions we can all get
behind and hopefully implement. In that regard, the small
business community's input will be critical.
This Committee does its best work when we hear firsthand
from small businesses. In that regard, I look forward to
hearing today's testimony. Let me again thank the witnesses,
and I yield back.
Chairman CHABOT. Thank you very much. The gentleman yields
back.
And if Committee members have opening statements prepared,
I would ask that they be submitted for the record.
And I would like to take just a moment to explain our
timing rules in this Committee. It is pretty simple. It is a 5-
minute rule. Each of you will get 5 minutes and then each of us
will get 5 minutes to ask questions. And there is a lighting
system to assist you in staying within the limits. The green
light will be on for 4 minutes. The yellow light will come on
when you have got a minute to wrap up, and then when the red
light comes on, if you could wrap up by then, we would
appreciate it. If you go a little bit over, that would be okay,
but not a lot over. So if you could stay within that we would
greatly appreciate it.
I would now like to introduce our very distinguished panel
here this morning. Our first witness is Maxine Turner, who is
the founder of Cuisine Unlimited in Salt Lake City, Utah. After
8 years in the financial services industry, Ms. Turner was
asked to join a nonprofit organization in heading their
fundraising catering program. Her interest in events grew from
this experience and she later established Cuisine Unlimited
Catering and Special Events, an award-winning national and
international catering and special event company. Established
in 1980, her company now employs over 120 people. She is
testifying on behalf of the United States Chamber of Commerce
in her capacity as chairperson of their Small Business Council,
and we welcome you here this morning, Ms. Turner.
Our next witness will be Anne Chambers, who is the owner of
Red212 in Cincinnati, Ohio. I will repeat that. In Cincinnati,
Ohio, which happens to be my hometown. Red212 is an independent
content strategy agency that offers digital, traditional, and
cultural solutions. She is testifying on behalf of Women
Impacting Public Policy, WIPP, a national nonpartisan
organization advocating on behalf of women entrepreneurs. Since
its inception in June of 2001, WIPP has reviewed, provided
input, and taken specific positions on many economic issues and
policies which affect the bottom line of its members. And we
thank you also for participating this morning.
And up next is Rutland ``Skip'' Paal, president and CEO of
Rutland Beard Floral Group, RBFG, a fourth generation family-
owned floral business with more than 180 employees across 4
States. RBFG delivers nearly 100,000 floral orders annually,
and under Skip's leadership and direction the company has grown
over 1,500 percent during the past decade. He currently serves
on the board of directors of the Society for American Florists
and is testifying in that capacity today. We also welcome you
here.
And I would now like to yield to Mr. Schneider, who is not
only filling in for Ms. Velazquez, but is also the ranking
member in his own right for the Agriculture, Energy, and Trade
Subcommittee, for introducing our next witness.
Mr. SCHNEIDER. Thank you. It is always an honor to
introduce an expert witness. It is even a greater honor to
introduce a friend.
David Borris of Hel's Kitchen in Northbrook, Illinois.
David began in 1985 in a 900-square-foot retail storefront with
his wife. Pursuing the American dream, all they wanted to do
was have the opportunity to use their balanced energy and
acquired hospitality skills to offer our community, the North
Shore of Chicago, a new experience in gourmet retail carryout
food. Armed with a handful of amazing family recipes and a
steadfast, unfailing work ethic, they set out to fulfill this
vision. Thirty-two years and three expansions later, Hel's
Kitchen Catering has become a permanent fixture in our
community. What started as a simple dream for two committed
entrepreneurs has become the lifeblood and livelihood for
dozens of employees.
David has been a leader with Main Street Alliance since
2008. He is a member of the Main Street Alliance Executive
Committee, has represented Main Street Alliance numerous times
in Illinois, and even here in Washington, D.C., on a variety of
issues ranging from health care, job quality, climate justice,
tax reform, incorporation transparency, Wall Street reform, and
more. He understands the issues, he is a good friend, and I am
glad to have you here. Thank you very much.
Chairman CHABOT. Thank you very much.
As I said, we have a very distinguished panel and, Ms.
Turner, you are recognized for 5 minutes.
STATEMENTS OF MAXINE TURNER, FOUNDER, CUISINE UNLIMITED; ANNE
CHAMBERS, CO-FOUNDER AND CEO, RED212; RUTLAND ``SKIP'' PAAL,
OWNER, RUTLAND BEARD FLORAL GROUP; DAVID BORRIS, OWNER, HEL'S
KITCHEN CATERING
STATEMENT OF MAXINE TURNER
Ms. TURNER. Thank you so much. Chairman Chabot, Ranking
Member, thank you so very much for this opportunity to speak
with you today.
My name again is Maxine Turner. I am the founder of Cuisine
Unlimited. We are a catering and special event company in Salt
Lake City, Utah.
My 37-year-old company is now a second generation family-
owned business with 120 employees catering events certainly
locally, nationally, and internationally. We have been involved
with seven Olympic Games, including exclusive cater at USA
House in Athens and Torino.
I represent the U.S. Chamber of Commerce, of which I am on
the board and chairperson of the Small Business Council. I am
honored to speak before you today regarding the critical issues
that affect our small business community.
The Chamber represents the interests of over 3 million
businesses of all sizes, sectors, and regions. The majority of
Chamber members are small firms. In fact, 96 percent have fewer
than 100 employees. Our Small Business Council works to ensure
the views of small businesses are part of the Chamber's
policymaking procedures.
As chair, I have met with hundreds of business owners to
better understand the small business landscape. Over the past
decade there have been many obstacles, including the worst
recession since the Great Depression and a multitude of Federal
mandates that have challenged our very existence.
We want to grow our companies. We find, however, roadblocks
to that opportunity. We want to work with you to change that
course so that we may have the resources to expand and create
new jobs.
Law passage of the Dodd-Frank law may have calmed fears of
another financial meltdown. An unintended consequence of that
law has been limiting small businesses access to capital. My
company was impacted by these over-restrictive credit policies.
We were awarded the exclusive catering contract at our
Performing Arts Center. It required an investment to equip
three kitchens onsite with small wares. We met with several
banks and our SBA representative. We have had four very
successful loans with SBA, all repaid ahead of schedule.
The bottom line, we were turned away by all the banks. How
could we fulfill our obligation to this contract without
financial backing? We looked to other sources and learned of a
grant offered by our city. We applied and received one-third of
the necessary funds. We made due equipping only one of those
kitchens and used the small wares that we had existing in our
catering operation. We used much of our profits from 2016 to
purchase critical items with the hope that 2017 will see us
through any additional challenges.
My story is not unique. It simply should not be this hard
for businesses to get access to the capital they need.
A Small Business Council member, Ashok Krish, is a good
example of how tech firms are struggling to keep up with
staffing needs. Ashok is the owner of Kaizen Technologies in
Edison, New Jersey. There are over 3,000 IT firms in the
tristate area. His needs for highly skilled workers cannot be
met without a reliance on foreign professionals who work under
the H1B visa program. He cannot fill the technical positions he
currently has.
Many of our small business members have voiced concerns
about regulations. From the overtime rule to the fiduciary
rule, the minimum wage, to Affordable Care, we have worked with
policy committees at the Chamber and have testified before your
Committee to try and bring about regulatory reform.
Tom Donahue, in his State of the American Address, said if
we are able to move our economy 2 percent to that 3 percent
growth, that is not a 1 percent increase in performance; it is
a 50 percent increase. Ultimately, growth is not about numbers.
Growth is about people. This growth rate would have an
extraordinary impact on jobs and opportunities, not for just a
few, but for the many.
New opportunities, beginning with tax reform, regulatory
reform, and other priorities should have better result on our
economy. A healthcare program that meets the needs of our
citizens with reasonable costs will spark new optimism. We are
here to support and to work with you, to stroke an economy
where opportunities abound.
Thank you again for this opportunity to speak with you
today, and I look forward to any questions you may have.
Chairman CHABOT. Thank you very much.
Ms. Chambers, you are recognized for 5 minutes.
STATEMENT OF ANNE CHAMBERS
Ms. CHAMBERS. Thank you. Good morning, Chair Chabot, and
good morning to the Committee. My name is Anne Chambers. I am
the CEO and owner of an ad agency in Cincinnati called Red212,
as well as a startup called Jambaar. I am testifying today on
behalf of Women Impacting Public Policy, a national nonpartisan
organization that advocates on behalf of women entrepreneurs.
I admit the title of this hearing is a little daunting,
``Making Washington Work for America's Small Businesses.'' But
I think the tagline for my business, Red212, might be helpful
to this conversation.
``At 211 degrees Fahrenheit, water is just hot. But by
raising the temperature just 1 degree to 212 degrees, water
boils and change occurs. Steam is created with a force so
powerful that it can hurtle a locomotive across a continent and
this 1 degree makes all the difference.''
I understand that this Committee has a history of
bipartisanship and we are really thankful to the leadership of
the Committee for its ability to get things done, mostly by
raising cooperation and collaboration by 1 degree. WIPP
publishes an annual blueprint that lays out policy principles
and recommended congressional actions.
The 2017 edition is hot off the presses, so I will
concentrate my remarks on a few of the major issue areas that
we know Congress is interested in pursuing. First and foremost
is tax reform. For far too long, small businesses have
struggled with the cost of compliance, and we have paid far
higher taxes than large businesses. Higher rates. The House
Blueprint on Tax Reform finally addresses the tax rate of pass-
through entities by capping it at 25 percent. Further, it
proposes to repeal the estate tax and the alternative minimum
tax. This meaningful reduction in taxes would give us
additional capital to grow our businesses and create jobs. Our
economic blueprint calls for fair and equitable tax treatment
for all businesses.
Health reform is another issue constantly on our minds. The
primary concern here is that any changes made to the current
system take into account the impact on the small group market.
Without the ability to pool, small businesses do not have the
market clout to buy insurance.
Equally important is access to pricing. We are disappointed
that the current pooling mechanism, the instate-based
exchanges, have underperformed. We are not wedded to the
current system of exchanges. However, ensuring that a
replacement plan contains an effective pooling mechanism will
make Washington work for us.
Access to capital continues to hinder business growth for
women-owned businesses, as Maxine pointed out. With the
emergence of technology-based lenders, crowd funding, and
community development financial institutions, CDFIs, more
options exist for women business owners than ever before. But
women still lag behind their male counterparts with respect to
access to capital. In fact, only 4 percent of all commercial
loan dollars and 10 percent of all venture capital goes to
women-owned firms.
We recommend that Congress take the following steps. First,
support SBA programs that provide women business owners with
the business assistance they need to obtain capital, such as
Women's Business Centers, SBDCs, and SCORE.
Second, continue to support SBA loan programs. Again, as
Maxine pointed out the importance of these, we encourage you to
modernize the microloan program which has proven to be an
important source of capital for women-owned businesses.
As this Committee is well aware, WIPP fought for access to
Federal contracts through the WOSB Procurement Program for 15
years. Although great strides have been made with respect to
accessing Federal contracts, much more remains to be done.
In 2016, WIPP published a report, ``Do Not Enter,'' which
showed that women lack access to the government's largest
contracts, Multiple Award Contracts, MACs. We are calling on
Congress to require SBA to do a study of all MACs and determine
to what extent women and other socioeconomic groups have tracks
which allow them to compete for these large contracts.
Last but certainly not least, compliance with regulations
is part of doing business. We certainly appreciate the efforts
by this Committee to increase the SBA's Office of Advocacy's
clout as this will result in an amplification of our voice.
President Reagan once said the most terrifying words in the
English language are, ``I am from the government and I am here
to help.'' WIPP believes that by working in a bipartisan
fashion, Washington can truly be here to help. Women
entrepreneurs all over this great Nation have the expectation
that our elected officials are here to help. Whether it is
access to Federal markets, access to capital, or lessening the
tax burden, we stand ready to work with you on these important
issues.
This concludes my testimony. Thank you so much.
Chairman CHABOT. Thank you very much, Ms. Chambers. And we
would like to think that this Committee is here to help, but I
do not know if I can speak for overall Washington.
Mr. Paal, you are recognized for 5 minutes.
STATEMENT OF RUTLAND ``SKIP'' PAAL
Mr. PAAL. Mr. Chairman and distinguished members, thank you
for inviting me to present testimony before the Committee.
I am a fourth generation florist. In 1923, my great-
grandfather opened a flower shop and greenhouses outside
Baltimore. We now operate out of 12 locations in Maryland and
New Jersey, including my great-grandfather's original location.
Our employees are the heart of our business. They are the ones
who comfort grieving families, share hugs with new
grandparents, and see true love between couples preparing for
marriage.
We have always taken care of our employees. We were
offering health care decades before ACA required us to do so.
We established a company-sponsored retirement plan when we
realized Social Security might not be enough for our retirees.
We have a paid leave program that is extremely competitive for
retail and nearly unheard of in the flower business.
As a result, we have many valued employees who have made a
lifelong career with us. It is important to note that our
company attracts talent by offering competitive wages and
benefits because we want to, not because we are forced to.
Having the opportunity to set ourselves higher than required
allows us to maintain a competitive employment environment.
Since several years have elapsed since full implementation
of the ACA, we have had an opportunity to see firsthand the
devastating impacts that have occurred as a result of the
legislation in our business. Since the enactment of the ACA,
our monthly premiums have nearly doubled, yet our deductibles
have more than tripled. In my opinion, it is not wise Federal
policy to force us to pay significantly more for substantially
less coverage.
In addition to skyrocketing costs and reductions in
benefits, the ACA has placed me at a competitive disadvantage
because my competitors are not required to offer health care
and are able to entice prospective employees with a higher
salary. I ask Congress to fix the broken ACA system that is
detrimental to me and countless other Main Street businesses.
I applaud the recognition by Congress and the
administration that the Tax Code, which seems to be so complex
that not even my account can fully understand it, needs to be
drastically simplified.
Payroll taxes are simple, straightforward to calculate, and
easy to plan for. We need something just as uncomplicated for
corporate and pass-through taxes.
While I highly commend efforts to reform our Tax Code, the
Border Adjustment Proposal would be devastating to my business.
Nearly 95 percent of the flowers I use in my retail flower
shops are grown overseas. There is no domestic capacity to meet
the demand. Flowers are not a necessity like food, clothing, or
housing. If our products are taxed at a higher rate, those
costs will translate to higher prices and consumers will shift
their spending to other products where flowers have
traditionally been appropriate.
I ask that any border adjustment and tax reform exempt
floral agricultural products to avoid significant harm to the
more than 10,000 small flower shops across the country.
There also needs to be certainty in legislation and
regulation that allows small business owners to properly plan
and prepare. The current environment creates economic chaos
where we are unable to plan for payroll, benefits, or growth.
Due to the current uncertainty, I am not comfortable continuing
to expand my business. Constant political upheaval and shifting
rules are counterproductive to business growth.
In an era where only some criticize our government, I do
want to take an opportunity to say thank you. I urge the
Committee to celebrate prior bipartisan successes, such as
repealing 1099 reporting requirements and reforming the estate
tax, which have been issues with bipartisan support that have
directly benefitted Main Street. However, there is much more
work to do. I am hopeful that this Committee and this Congress
will act to give a degree of certainty and clarity to business
and to craft and pass legislation which will lead small
business into a new era of prosperity.
I am hopeful that my great-grandchildren will be able to
take the reins of the family business 94 years from now just as
I am today.
Thank you again for giving me the opportunity to present
this testimony before the Committee, and I look forward to
answering any questions the members may have.
Chairman CHABOT. Thank you very much.
Mr. Borris, you are recognized for 5 minutes.
STATEMENT OF DAVID BORRIS
Mr. BORRIS. Thank you, Chairman Chabot, Congressman
Schneider, and members of the Committee. Thank you for the
invitation to testify today.
My name is David Borris, and I serve on the Executive
Committee of the Main Street Alliance, a national network of
small business owners. I have been a small business owner for
32 years. My wife and I opened a homemade food store in 1985,
and over the years have expanded it into a full-service
catering company with 33 full-time employees and over 80 part-
time and seasonal workers. We take great pride in what we do.
Businesses need safety, transparency, and predictability in
order to thrive. Today, I will focus on what Washington can do
to ensure these basic vital conditions are met so small
businesses like mine can succeed.
This starts with ensuring that my employees, my family, and
I can access quality, affordable health coverage. Hel's began
offering health care in 1992, as we felt a moral obligation to
do right by the people who are making our lives' work theirs as
well. Employees contributed 50 percent in the first year and
nothing thereafter. Beginning around 2002, though, we began to
experience a series of annual, volatile premium increases. In
2004, 21 percent; in 2005, 10 percent; in 2006, 16 percent; in
2007, 17 percent; and in 2008, yet another double-digit
increase forced us to ask long-term employees to reach into
their pockets once again.
Just as confounding as the premium swings themselves was
the source of their unpredictability. For example, we had a
dishwasher, great at his job for he suffered from a malady that
required kidney dialysis. When I met with my insurance broker
to discuss the steep rising premium for the upcoming year, he
quietly acknowledged the spike was primarily due to the illness
of that one single employee.
The ACA has helped stabilize these costs as insurers can no
longer underwrite based on health status and must adhere to
medium medical loss ratios. This shields my business from sharp
swings in premiums based on the health of one or two employees.
I see these gains in my bottom line.
My company has witnessed an unprecedented slowdown in rate
increases. Since the passage of the ACA, our average annual
increases are a fraction of what they were before, averaging
4.6 percent annually for the past 7 years. I am saving money on
premiums and can plow those savings back into business
investments and job creation.
Beyond health care, the Federal Government has to ensure
that we have sensible, protective regulations in place. As a
small business owner who deals with regulations every day, I
recognize the profound value of good regulation. Let me give an
example close to home.
I make my living preparing food. On a daily basis, I
receive poultry, beef, and dairy products at my back door. I
know that I can trust the safety of that food because of strong
national industry regulations. And food service operations are
some of the largest consumers of potable water in the country.
We need powerful oversight of food and clean water regulations
to stay in business. If Northbrook, Illinois, were to go
through what Flint, Michigan, went through, I would be out of
business the next day.
Finally, what businesses like mine require more than
anything from our Federal Government are evidence-based
policies that keep overall consumer demand strong. The single-
most important thing I need to be successful and to create more
jobs is more customers, not tax breaks, not fewer regulations,
customers; customers with enough disposable income to engage my
services. The health of my business is tied to a healthy
economy that has money circulating in a virtuous cycle of
rising wages, consumer demand, and job creation. To do this we
should raise the Federal minimum wage.
Henry Ford understood the link between well-paid employees
and paying customers more than a century ago when he recognized
his business would only succeed if his workers earned enough
money to buy the cars they were building and he doubled their
wages overnight. In our local economies, the same link applies.
My fairly paid employee is my neighbor businesses' paying
customer. When people in my neighborhood cannot earn enough to
keep up with the basics--things like buying goods, obtaining
school supplies, and making car repairs--the entire local
economy becomes unstable. That is bad for small business and
bad for the economy as a whole.
And finally, sensible immigration reform is critical for an
inclusive healthy middle class. In the 10th Congressional
District of Illinois alone, there are over 172,000 immigrant
residents, including 5,700 entrepreneurs paying $1.7 billion in
taxes and spending over $4.5 billion in our economy. Our
current immigration and visa policies not only discourage
international tourism and business travelers, but also hinder
many businesses from finding the workers they need. We need to
change that.
In closing, I believe the role of Washington is to create
the basic market conditions that allow small businesses like
mine to thrive and compete on a level playing field with our
larger competitors. We cannot continue to be the job creators
and innovators that America needs us to be without these basic
conditions. Affordable quality health care, sensible protective
regulations, and policies that fuel a strong middle class, this
is the recipe for small business success.
Thank you again. I look forward to your questions.
Chairman CHABOT. Thank you very much.
We would now like to go into our questioning and, Ms.
Turner, I will begin with you. I recognize myself for 5
minutes.
It is said that a rising tide lifts all boats, and we have
been seeing some good news lately in a number of areas. We have
seen the stock market at record highs. We have seen
unemployment numbers coming down, and productivity gains and
other positive economic factors lately. What can we do here in
Washington to ensure that those gains reach the small business
segment of the American economy?
Ms. TURNER. Can you hear me okay? I think it is the access
to capital first and foremost. We have been waiting for such a
long time in order to be able to expand our companies, to grow
our businesses. I think the access to capital, especially since
the economy is strong at this point, that would be the number
one thing that we could use.
Chairman CHABOT. And you mentioned that Dodd-Frank has been
particularly detrimental to that effort to make sure that small
businesses get more access to capital, is that right?
Ms. TURNER. I do. I think that has to be reformed.
Chairman CHABOT. Okay. Thank you very much.
Ms. Chambers, I will move to you next. This week the House
is debating H.R. 1101, the Small Business Health Fairness Act,
which would allow small businesses to band together through
associations to purchase quality health care for their workers
and their families, hopefully at a lower cost. You mentioned
that WIPP, Women Impacting Public Policy, supported such
measures in the past. Could you explain how policies such as
the one that we are considering this week could help small
businesses lower their healthcare costs?
Ms. CHAMBERS. WIPP has supported----
Chairman CHABOT. Can you turn the mic on? I am not sure if
it is on.
Ms. CHAMBERS. I am sorry.
Chairman CHABOT. That is all right.
Ms. CHAMBERS. WIPP has supported association health plans
for a long time and the idea is that it gives us so much more
negotiating power because as small businesses we simply cannot
compete with the negotiating power that big businesses have. So
if Congress can allow small businesses to join bigger pools,
especially across State lines, it gives us even more buying
power.
Our objectives really are to have choice of plans and lower
prices. That is our main goal. It is complicated. I think we
talked about it earlier, Mr. Borris, and the devil I think is
in the details, but this is important to us.
Chairman CHABOT. Okay. Thank you very much.
Mr. Paal, I will go to you next. Could you talk a little
bit about the nexus of how Obamacare has not only driven up
costs, especially in your instance. I think you said that your
premiums have doubled and the deductibles have risen, so
actually using that has tripled. So even if you have coverage,
oftentimes you are paying so much out-of-pocket, by the time
the insurance kicks in, you effectively, arguably do not really
have health insurance, or at least very good health insurance.
And it has also raised taxes, Obamacare has, on small business
owners, and significantly increased regulatory costs. Arguably,
it is kind of like a triple whammy. Would you address that?
Mr. PAAL. Sure. Thank you for the question.
As far as ACA is concerned, one of the biggest challenges
that it hits us with is we are in this middle ground. We have
more than 50 FTEs, so we are required to offer health care, but
we do not have more than 50 full-time employees. And so as a
result, we get put into large group insurance plans when we
really only have 15 to 20 employees who actually participate
with them. So the ratings and the underwriting that is involved
on our end ends up driving those premiums way up.
In addition, we happen to own a number of individual,
standalone, retail flower shops. Most other retail flower shops
do not hit that threshold of having to provide coverage, so
most of my competitors are able to offer a little bit more in
terms of a salary to their employees or prospective employees
whereas those employees can then go on the exchange and get a
lesser expensive plan or a subsidy. We are not able to do that
because we have to offer them the coverage, and if they do not
take it from us, they do not get the subsidy. So it is a
vicious cycle that definitely needs some work.
Chairman CHABOT. Thank you.
And I do not have a whole lot of time, but I want to go to
you, Mr. Borris, if I can. In your testimony you did not
mention any regulations that negatively impact your business.
Are there any Federal regulations that you do not like?
Mr. BORRIS. Yeah, so we are a small business. Right? I can
honestly tell you that I cannot think of a time that I sit at
my desk and I am tearing my hair out over why do I need to
comply with this and why do I need to comply with that? Now, it
just has not really hit me in that way.
Chairman CHABOT. Okay. Fair enough. The answer basically is
there are not any that come to mind that you do not like coming
out of Washington?
Mr. BORRIS. Correct.
Chairman CHABOT. Okay. Thank you very much.
The ranking member is recognized for 5 minutes.
Mr. SCHNEIDER. Thank you. And again, thank you to the
witnesses for sharing your experience, your insight. It is so
important for us to hear what you are dealing with so we can
understand. Ms. Chambers, as you said, we really can and hope
to be of some assistance to clear away the obstacles to help
small businesses succeed.
As I think, and I come from a small business background,
having my own business working with other clients in my
consulting practice, but in my mind there are four big things
that the businesses really need to succeed. The first we cannot
help you with. It is the concept. Each of you have your own
business concept. People come up with their ideas. Some are
good, some are bad, some will succeed. That is what the market
should determine. But the other areas I think we can help.
The second thing I think we need, and you have touched on
it, is talent. Access to talent. Good people who have the
skills to come to your businesses, learn your specific
business, and that I think falls on us to make sure that we are
investing in education, that we are providing young people the
skills and lessons they need to go into business to do any
variety of things and training the next generation of
entrepreneurs.
Ms. Turner, as you touched, and I agree with you, the need
to have access to capital, we all have our ideas. Without the
capital behind them, whether that is going to get a loan from a
bank, to be able to reach out to angel investors--and I will
complement the chairman on his effort of passing in the House
anyway, the Halos Act, and we need to see that pass in the
Senate. But capital is crucial.
It is the fourth thing that I think is most important in
general for the economy, and that is a stable business
environment. That comes from sensible regulation that lays out
the lines. In my mind I use my analogy all the time of a
bowling alley. Regulations should be the bumpers and the gutter
to keep the balls from going in the gutter. If they start to
encroach on the alley and make it more difficult to knock down
the pins, they have gone too far. If they start exposing the
gutter to risks, they have gone too far the other way.
But it is also on taxes, as you touched on, Mr. Paal. It is
on confidence, knowing what is coming out of this institution
so small businesses in particular can make the plans. I think
the reason we have seen small businesses not leading the last
recovery is because small business owners can make the decision
to wait another month, another year to do that. So I think that
is key.
As I focus on the uncertainty, Mr. Borris, I am going to
turn to you and part of your last remarks because you talked
about immigration reform, the need for immigration reform.
Well, the CBO has said if we pass comprehensive immigration
reform it would add $2 trillion to our economy. What impact has
the uncertainty and perhaps the recent executive orders had on
your business?
Mr. BORRIS. Yeah. So my entire kitchen staff, right, are
all immigrant workers, and half my operation staff, 70 percent,
80 percent of my hourly laborers are from immigrant families.
And it is this climate of fear that is living in there now.
Even though, you know, we have I9s, all my guys are legal, but
I do not know what the story is with their extended families--
parents, brothers, uncles, sisters--and it is an
extraordinarily uncomfortable thing for them. And to look at
them and juxtapose to my Caucasian, you know, five-generation
citizens of the United States, to impose that on them is
extraordinarily uncomfortable.
And what we do not know is that if this thing starts to
turn into tremendous mass deportations, what happens when an
uncle gets deported and now my guy says, well, I cannot really
stay here now because I have got to go back home and help him
out even though I can stay here and be here. I think we all
know the comprehensive immigration reform is critical to
getting people out of the shadows, getting people to a point
where they can earn more money so that they can feel empowered
that they can negotiate and not feel like they have to be
afraid with their bosses, feel empowered to work in safe
working conditions. I mean, it is a train wreck and the way to
address it is not to----
Mr. SCHNEIDER. I do not mean to cut you off, but I want to
turn to the others. If it were possible that across the aisle
we could come together and come up with a policy to secure our
borders, to have certainty around immigration law, would it
have an impact on your business? Mr. Paal?
Mr. PAAL. Most certainly it would. There is a huge segment
in the floral growing industry, especially on the West Coast,
that depends heavily on immigrant labor, and they are
struggling right now with finding good people and it is an
issue for us on an ongoing basis. Not me directly, but it is
the trickledown to me. If they are able to get the flowers
grown then, then it lessens some of the impact on some of the
other issues.
Mr. SCHNEIDER. Ms. Chambers, Ms. Turner?
Ms. CHAMBERS. For me, not as directly for Red212, but for
Jambaar, the startup that I am doing, in terms of technology
expertise and the growth that we are going to need with
employees, yes, I do think it will.
Mr. SCHNEIDER. And Mrs. Turner--Ms. Turner?
Ms. TURNER. Absolutely. We have about 15 immigrant
employees, and there is that feeling of uncertainty for them.
Even though they have been through E-Verify and we know that
they are here, it is the extended families that we worry about
and the impact that that could have on our company. And they
are family. Some of them have been with me for 20, 25 years. It
is a difficult situation and we empathize that they worry about
this every single day.
Mr. SCHNEIDER. Well, thank you. My time is expired and I
yield back.
Chairman CHABOT. Thank you. The gentleman's time is
expired.
The gentleman from Nebraska, Mr. Bacon, is recognized for 5
minutes.
Mr. BACON. Thank you. We appreciate our distinguished panel
for being here today and I associate my comments, too, with Mr.
Schneider there. I think we do need to find a bipartisan way
forward on securing the border, but plus, find a better way to
meet business concerns with immigration. We have got to
modernize that and find a compassionate way ahead for those who
are here. So I think we can do that working together.
My first question is for Mrs. Turner. We had a previous
testimony here that said that regulations were the top concern
for small businesses, but it has recently been superseded by
health care and the ACA and the impacts of the costs. I think
also going around my district I hear about health care,
regulations, taxes, access to capital, and also having a hard
time finding a workforce to fill spots. What would be the top
one or two things that we should be focusing on out of that
list?
Ms. TURNER. You know, I think so much of this is
regionalized, because what is affecting middle America is
different for other regions. Every single one of these is
important. Every single one of these has to be addressed. If I
were looking at my own company in my narrow part of the world,
it would be regulatory.
Mr. BACON. Okay.
Ms. TURNER. Has a tremendous affect. But having spoken with
small businesses throughout the company, there is not one thing
that I would say comes to the top of the list every single
time. It is a gamut.
Mr. BACON. So we have got a lot of work to do. That is what
I am hearing.
Ms. TURNER. You certainly do.
Mr. BACON. Okay.
Ms. Chambers, could you expand a little bit on why it is so
important for Congress to nullify the blacklisting rule by
passing H.R. 37?
Ms. CHAMBERS. I do not know what the blacklisting rule is.
Mr. BACON. Okay. Okay, well, we come back to that then.
Are there others?
Ms. CHAMBERS. Okay. I understand blacklisting contractors.
WIPP is happy for the repeal that was done.
Mr. BACON. Okay.
Ms. CHAMBERS. Blacklisting contractors.
Mr. BACON. Are there any other regulations we should go
after with the Congressional Review Act? Or any other
regulations we need to pull out?
Ms. CHAMBERS. No. I mean, my focus is on access to capital
and representing Women Impacting Public Policy.
Mr. BACON. Okay.
Ms. CHAMBERS. So our issues are really around parody and--
--
Mr. BACON. The access to capital focus area. Okay.
Ms. CHAMBERS. As well as tax reform for small businesses.
Mr. BACON. And one last question to Mr. Paal. Your
testimony about the premiums are compelling: double the
premiums, triple the deductibles. Hard to afford that.
Mr. PAAL. It is. And where we really see it, you know, it
hits home. We had my first son 5 years ago, or 5-1/2 years ago,
and I remember our deductibles then. And we are pregnant with
our third now and our deductibles are much different and our
copays are much different this time around. And so you see it
firsthand in the course of just a couple of years.
Mr. BACON. I just encountered a recent mom who had a
$12,000 deductible. Her health care paid not a single penny for
the delivery of her child, so it did not work for her.
Could you expand a little bit about the impact of the
overtime rule and how that has impacted your business? We are
going to open it up to all four of you.
Mr. PAAL. Absolutely. It has impacted us tremendously. We
have a number of, especially our management team, they are all
salaried employees. And being a somewhat seasonal business,
Valentine's week, everybody is working. Everybody is working
every day and we are working long hours. And one of the
privileges that our staff that were salary-based had enjoyed
was being able to take some extra time off the next week or the
next month and still get their full pay. So their cash flow at
their level was consistent. We had to redesign our whole
compensation package when those regulations came out, so we
still have, you know, when I talk about uncertainty, that is it
in a nutshell right there. We do not know where it is going to
land.
Mr. BACON. Right. Mr. Borris, has the overtime rule
impacted you?
Mr. BORRIS. Yeah. So what we did with the overtime rule is
we had to be a little bit thoughtful about how we were
structuring salaries in the $35,000 to $40,000 range, because I
do have people who earn in the $35,000 to $40,000 range. And
our understanding of the overtime rule is that you can create a
salary based on a workweek larger than 40 hours. Right? As long
as you are not falling underneath minimum wage requirements.
Right? For us, we actually have higher minimum wage
requirements personally in my company than we do in the State
of Illinois, or sadly at the Federal level. I mean, we have an
$11 minimum wage as a company minimum wage. So I think that
some of the conversation on the overtime rule can continue to
be expanded. I think the intent of it is critical, though, that
we look at when we are talking about either hourly wages or
salaried wages that what we are looking at is how do we
continue to put upward pressure on wages so that we put upward
pressure and more money circulating in the economy? So while I
am not necessarily averse to having a deeper discussion on how
we nuanced the overtime rule, I think the idea behind it is
important. And when we look at what has happened with salaried
employees over a 30-year period and we look at the lack of
purchasing power and then we look at organizations who deeply
take advantage of people. Right? A kid working at a gas station
is supposed to be 70 hours a week and because we give him a key
and tell him he can lock the door, so he satisfies the duties
test and he is getting paid $22,000 to work 70 hours a week,
that does not help my local economy.
Mr. BACON. Well, my time is expired. I want to thank you
all for your testimony, and I yield back.
Chairman CHABOT. Thank you. The gentleman yields back. And
I might note my first job was pumping gas in an Ohio station,
in Cincinnati, Ohio, and I made $1.25 an hour. I thought I was
making big money, so.
Mr. BORRIS. At least you got the $1.25 for every hour you
worked.
Chairman CHABOT. That is right. And the job, there are not
many people who pump gas anymore, other than they used to do it
at the Exxon station on Capitol Hill on Pennsylvania Avenue
where it is like $2.10 elsewhere and it is like $5 up there,
but it is one of the only stations around so you pay it. Sorry,
I digressed there a bit.
The gentleman from Pennsylvania, Mr. Evans, who is the
ranking member of the Subcommittee on Economic Growth, Tax, and
Capital Access, is recognized for 5 minutes.
Mr. EVANS. Thank you, Mr. Chairman.
Mr. Borris, I would like to--the title of this hearing is
``Making Washington Work for American Small Business'' is the
title. Then when I go to your testimony, on page 4 you say,
``Small business owners need policies that keep consumer demand
strong.'' So what I am trying to figure out is, are we talking
past each other?
Because I am listening carefully to what you said. You said
not tax breaks, not fewer regulations, not less oversight, but
more customers. So what I am interested in is you said making
Washington work for small business, and I need you to tell us,
it does not sound like we are either listening to you on the
frontline, and I am just curious if anybody else has that same
view because I thought you were very direct in what you said,
the name of the game is customer, not that your taxes need to
be in--not that everything is overregulated. I am just trying
to reconcile what is being said at the hearing and what you
were saying.
So are we missing something? Tell me.
Mr. BORRIS. Yeah, that is a nice broad-based question.
Mr. EVANS. Yes, I need this.
Mr. BORRIS. I think that there is a few areas, right?
Mr. EVANS. Go ahead.
Mr. BORRIS. One I touched on is wage growth.
Mr. EVANS. Right.
Mr. BORRIS. For Washington to get behind seeing solid wage
growth and to create conditions that push for that I think is
really important. I think on tax policy it is really important.
I think every small business owner at the table would agree
with me that as a small business, none of us have--do any of
you guys have five or six tax accountants working for you and
trying to pick out the loopholes, right? So I think that when
we look at companies that do not pay their fair share, right,
when we have, you know, if it is 288 profitable Fortune 500
companies, 26 paid no Federal income tax last year. So where
does that money sit? So it sits in their coffers. They are not
putting it back into the economy.
We have trillions of dollars expatriated offshore. If we
could figure out a way to get that back in a fair way and not
in such a low rate that they are incentivized to do it again
and again and again and put that money to work in this economy,
that is going to exponentially help the free flow of capital
through the economy. For me, it is really about aggregate
demand, right?
So when you guys are looking at policies, I would say that
the test for that is, is this going to stimulate additional
demand in the economy or is this just going to provide a whole
boatload of dough that is going to get scraped off the top into
the pockets of people who do not really need it and not going
to be flowing through the economy? Without being a policy
expert, you guys are policy experts, I am just a small business
owner, but those would be the things that I think would be
helpful.
Mr. EVANS. I think you are a better policy expert than
anybody because you are on the front line. I mean, you are. So
that is why I wanted to kind of reconcile the hearing title and
you.
Mr. Paal, your reaction to the aspect of the recognization
of the title and are we talking past each other?
Mr. PAAL. No. I think there has been an atmosphere, as far
as I have seen, of Washington working for Washington back and
forth in this and the typical politics that you hear about on
the news shows and whatnot. I think just physically having this
hearing makes it very clear consideration that this Committee
and this Congress is interested in what small business is
involved in.
I have had a lot of visits from local representatives back
in district at a bunch of our different retail locations, and
it is nice. They walk in, what can we do to help you? And they
are hearing at that point not just from me as a business owner,
but also my employees, our delivery drivers, our flower
designers, and our sales clerks that are working part-time. So
I applaud having the meeting for sure.
Mr. EVANS. Ms. Chambers?
Ms. CHAMBERS. I would echo what Mr. Paal said, that I think
the very fact that we are having this hearing speaks volumes
and that I think it really says that you are listening and that
we are having this back-and-forth, and I think the
collaboration is what is key. I think the bipartisanship is
fantastic, but I think that the collaboration and this
conversation is really important for our businesses.
Mr. EVANS. Ms. Turner?
Ms. TURNER. I think you are definitely hearing us. I think
that, as Mr. Bacon outlined, you have down the main points of
what it is that is concerning businesses. And so I do, and it
is a pleasure to be able to come forward and to speak with you
today because this is the kind of dialogue that is needed. It
is now your responsibility to then take what our concerns are
and to put these into policies that are then making a
difference for each and every one of our small businesses.
Mr. EVANS. Thank you, Mr. Chairman.
Chairman CHABOT. Thank you very much. The gentleman's time
is expired.
The gentlelady from North Carolina, Ms. Adams, is
recognized for 5 minutes, and she is the ranking member of the
Subcommittee on Investigations, Oversight, and Regulations.
Ms. ADAMS. Thank you, Mr. Chair and Ranking Member, and
thank you to all the witnesses for your testimony.
Ms. Chambers, to start, can you speak about what Congress
can do to proactively help small firms adapt to the current
levels of lending, which are better today, but still not as
great as previous session lending numbers?
Ms. CHAMBERS. Could you repeat that question for me?
Ms. ADAMS. Can you speak about what Congress can do to
proactively help small firms adapt to the current levels of
lending, which are better today, but still not as great as
previous session lending numbers?
Ms. CHAMBERS. In terms of the area that I focus on with
women-owned businesses because the numbers are so small, I
think as I said in my presentation or in my testimony,
supporting the various programs, particularly the SBA,
modernizing the micro-lending programs would be very beneficial
for women-owned businesses and businesses in general. But until
women have access to capital for their businesses, I think this
is an issue that will not go away.
Ms. ADAMS. Yes, ma'am. Would anyone else like to respond?
Mr. BORRIS. Yeah, I will jump in.
Ms. ADAMS. Yes, sir. Go ahead.
Mr. BORRIS. Yeah, so I think that either between the SBA
and between looking back at the Community Reinvestment Act,
right, so that we get more robust enforcement of what was
originally intended, right? That what we want to do, and I
think these guys would agree with me, also, we want to open up
this flow of capital not just for businesses with 500 employees
and 400 employees, but for businesses with 10 and 20 and 30 and
50 employees, right? Businesses who are trying to grow from a
$2 million business to a 4- or $5 million business, and not
just talking about $50 million and $100 million businesses.
They might well become $50 million businesses in the future if
we can help them get over the next leg.
So that would be my thinking on it. Not so much money going
into the big banks for the big loans, but pushing money into
community banks for smaller loans and being able to help small
business that way.
Ms. ADAMS. Thank you. To any member of the panel----
Ms. TURNER. Ms. Adams?
Ms. ADAMS. Yes? Oh, yes, ma'am. Go ahead.
Ms. TURNER. I think the repeal of Dodd-Frank would be a
very good way to begin, so that the community banks would be
able to lend to small businesses again.
Ms. ADAMS. Okay. Thank you for your comments.
With regard to tax reform, what policies are necessary to
include in a reform package, and which policies would you
consider a nonstarter with regard to its impact on small
businesses? Anyone who would like to respond can do so.
Mr. PAAL. Well, I could tell you and I spoke about it in my
opening statement. The Border Adjustment Tax would be a real
deal killer in the flower business. You know, most of our
flowers come out of either South America or Holland or Canada.
There is some growing happening in Mexico now. There is just
not production ability in the U.S. That is all we sell. It is
not like you say, okay, well, you know, the price of avocados
is going to go up at the grocery store. That is all we sell in
our business is flowers. So if that passes through, we cannot
absorb a 20 percent price increase, and we cannot pass it on to
our consumer because our customers will simply--they will just
not buy flowers. They will buy a fruit basket or candy or
something that is grown domestically. So that hits real big for
us. And whether there is an exemption for floral agriculture or
maybe an exemption for small business to a certain threshold
that would assist other industries as well.
Ms. ADAMS. Okay. Does anyone else want to comment with a
few seconds left?
Ms. CHAMBERS. Yes. I just want to add on that reforming the
Tax Code to make deductions and credits equitable no matter
what the structure of the business, especially around pass-
throughs, permanently repealing the estate tax and allowing
small businesses to pass from one generation to another as you
talked about, and then simplifying the Tax Code for small
businesses, as Mr. Borris said, I just want to support that as
well.
Ms. ADAMS. Great. Thank you very much. Mr. Chair, I yield
back.
Chairman CHABOT. Thank you. The gentlelady yields back.
The gentleman from Florida, Mr. Lawson, who is the ranking
member of the Subcommittee on Health and Technology, is
recognized for 5 minutes.
Mr. LAWSON. Thank you, Mr. Chairman.
My question will center around access to capital, and the
question would be since more credit unions and commercial
lenders have been getting involved in making loans to minority
and women-owned business, has that been very beneficial,
especially for women-owned businesses in the marketplace to
have greater access to capital? Ms. Chambers, you might want to
respond to that.
Ms. CHAMBERS. Well, certainly there has been improvement,
but we have such a long way to go. Women are still receiving
only 16 percent of all small business loans, so without making
much greater strides we are going to be behind our male
counterparts for a long, long time. So we are going to need to
continue with this push and think of different programs. The
idea that in government contracting we have finally reached our
5 percent quota last year, but it took 16 years to get there.
So I think that there is a lot of work that needs to be done.
Mr. LAWSON. Okay. And if I may, and someone else can answer
it, and this is where they say that they would like to keep the
government out of the small business situation, should there be
legislation that requires a financial institution to provide
resources for minority and women-owned business at a certain
level?
Mr. BORRIS. Is that an open question?
Mr. LAWSON. Yeah.
Mr. BORRIS. So yes, I think. The CDFI funding that was
zeroed out in the Trump budget should certainly be restored.
That is where I would begin, and I would also say that if we
are looking for where that money comes from into our Federal
coffers, I know there is going to be a big argument about what
the rate of repatriation is, but I think we can take one step
back in that conversation and talk about how we start ending
deferral to begin with so we do not have to deal with this
again with trillions of dollars in the future.
Mr. LAWSON. I have another question that you might have
responded to earlier. It appears that everyone speaks about
rebuilding America, you know, and I think about it as
rebuilding ports, railroads, bridges, and highways.
Infrastructure improvement is critical to America. Everyone
talks about it in every political campaign and so forth. Can
you detail the regional impact of spending, and is that
critical to small business growth?
Mr. BORRIS. Sure. I think that for any one of us to look at
what happened when Dwight Eisenhower made the decision, right,
to build the interstate highway system, for any of us to
believe that the business growth that we saw in the 1960s in
this country, to pretend that had nothing to do with taxpayer
investment and being able to move goods and services from
Cincinnati to New York in half the time that they used to move,
that matters tremendously. And I think the critical question on
infrastructure investment, though, is when we start granting
these contracts and we start investing taxpayer dollars, are we
going to allow companies to pay $6 an hour so that the company
that has the contract gets to keep all the profit which they
suck out of the community and take it to their multinational
headquarters? Or are we going to demand union wages, prevailing
wage? Are we going to make certain that that money gets spent
and stays in the pockets of the local communities where the
infrastructure development is being done? I think that is the
critical question.
Mr. LAWSON. Okay. And I will try to be brief on this
question. When I was in Florida in the Senate, I repealed the
intangible tax on businesses that are earning less than at that
time $25,000, you know, because it took probably more money to
pay the accountant to do the forms than the tax that it was
paying to the government. Should there be more consideration
done about repealing some of the other burdens that they have
on small businesses? Ms. Turner? I only have about 15----
Ms. TURNER. Absolutely. I totally agree with you that
changing that outlook will make small businesses flourish and
quicker. As I stated before, we have been waiting for this to
take shape and I think it is very important that we move
forward as quickly as possible. Once we start putting money
back into the small business community, we are going to see a
tremendous growth. And if we can hit that 1 percent, that 2 to
3 percent movement, then we are going to see extraordinary
things happen.
Chairman CHABOT. Thank you. The gentleman's time has
expired. Go ahead.
Mr. BORRIS. Okay. I would just say I agree. The incubator
conversation is an important conversation. Right? This is a
scalpel conversation versus a hatchet. And when we are looking
at regulations, yes, allowing it to soften on the smallest of
small businesses so we can incubate them and give them a chance
to grow makes sense. But to take that and then run that up to
business that are doing hundreds of millions of dollars and
letting them be the beneficiaries of those carve-outs because
we are going to try a one-size-fits-all does not work.
Chairman CHABOT. Thank you. The gentleman's time is
expired.
Just a brief comment from the chair before we adjourn the
hearing here today. The gentleman mentioned infrastructure and,
Mr. Borris, you mentioned the interstate highway system. I
happened to be at a speech last night and the keynote speaker
was somebody who probably half the people in this room thinks
is great and the other half loathe. And he gave an interesting
speech, and a couple of things he mentioned. One thing he
mentioned was Abraham Lincoln approving the intercontinental
railroad and he mentioned Eisenhower approving the interstate
highway system as you just mentioned that. And then he was
talking about the infrastructure bill and the importance of
that. I do not know if he was talking about putting himself in
the same category as those other two presidents, probably in
his mind yes, but it was interesting to hear your question,
your response, and think of what I just heard last night.
But in any event, I think this hearing has been very
helpful, and there is a whole lot of things going on. Tomorrow
we are supposed to have a key vote on one of the issues that we
touched on: health care. Whether that vote will happen or not
remains to be seen. It depends on whether the votes are there,
I think, or not, and maybe that is the reason some members are
not here; they are being worked on. But there is a lot of key
issues, like that one tomorrow on health care.
Regulations, you know, are a key issue that affect small
business folks. Tax reform that we touched upon, access to
capital and Dodd-Frank, a whole range of things are very
important issues, and I think this panel was very, very helpful
in letting our members and the members that we will communicate
with that did not have the ability to be here today to let them
know what the small business community thinks about these
issues and what kind of changes that we ought to be making. Not
just because it is relevant the small business community, but
they are paramount as far as this Committee is concerned.
So I want to thank you for shedding light on each of these
topics. You all did a great job, I think. Whether you were
called by the majority or the minority really, I think you are
all very, very good. So thank you very much for that.
I would ask that all members have 5 legislative days to
submit statements and supporting materials for the record. And
if there is no further business to come before the Committee,
we are adjourned. Thank you very much.
[Whereupon, at 12:09 p.m., the Committee was adjourned.]
A P P E N D I X
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The U.S. Chamber of Commerce is the world's largest
business federation representing the interests of more than 3
million businesses of all sizes, sectors, and regions, as well
as state and local chambers and industry associations. The
Chamber is dedicated to promoting, protecting, and defending
America's free enterprise system.
More than 96 percent of Chamber member companies have fewer
than 100 employees, and many of the nation's largest companies
are also active members. We are therefore cognizant not only of
the challenges facing smaller businesses, but also those facing
the business community at large.
Besides representing a cross-section of the American
business community with respect to the number of employees,
major classifications of American business--e.g.,
manufacturing, retailing, services, construction, wholesalers,
and finance--are represented. The Chamber has membership in all
50 states.
The Chamber's international reach is substantial as well.
We believe that global interdependence provides opportunities,
not threats. In addition to the American Chambers of Commerce
abroad, an increasing number of our members engage in the
export and import of both goods and services and have ongoing
investment activities. The Chamber favors strengthened
international competitiveness and opposes artificial U.S. and
foreign barriers to international business.
Thank you Chairman Chabot, Ranking Member Velazquez, and
Members of the Committee for the opportunity to speak with you
today. My name is Maxine Turner and I am the Founder of Cuisine
Unlimited Catering & Special Events in Salt Lake City, Utah. I
am here representing the U.S. Chamber of Commerce of which I am
a Board Member and chairperson of the Small Business Council. I
am honored to speak before you today regarding the critical
issues that affect or small business members.
The Chamber is the world's largest business federation. It
represents the interests of over 3 million businesses of all
sizes, sectors, and regions, as well as state and local
chambers and industry associations. The majority of Chamber
members are small firms. In fact, 96 percent of Chamber member
companies have fewer than 100 employees and 75 percent have
fewer than 10. Our Small Business Council works to ensure the
views of small business are considered as part of the Chamber's
policy-making process.
My company, Cuisine Unlimited, was established more than 37
years ago offering off-premise catering. Today, we are a
second-generation family owned business with 120 full and part-
time employees offering full catering and events services in
our local community, nationally and internationally. We have
catered events throughout the country and have been involved
with seven Olympic games. We were the exclusive caterer at USA
House for the United States Olympic Committee in Athens and
Torino.
As chair of the Small Business Council, I have met with
hundreds of small business owners to better understand the U.S.
small business landscape. Over the past decade, there have been
many obstacles to overcome, including the worst recession since
the Great Depression and a multitude of federal mandates coming
from Washington, DC that have challenged our very existence. We
want to grow our companies and contribute to the success of our
communities. We find, however, roadblocks to that opportunity.
We want to work with you to change that course so that our
businesses have the resources to expand, create new jobs, and
have a positive impact on our economy.
Sometimes it is overlooked that small businesses comprise
99 percent of all U.S. employer firms and provide almost half
the private-sector jobs.\1\ An individual employer may seem
small, but the collective economic power of small business is
very large. Roughly 50 percent of small businesses are women-
owned and the small business sector is a job-creation machine,
accounting for 2/3 of the net new jobs over the past two
decades.\2\ These facts reinforce the importance of policies
that encourage and help sustain our businesses so we may invest
in our future and that of our country.
---------------------------------------------------------------------------
\1\ Office of Advocacy, U.S. Small Business Administration,
Frequently Asked Questions (June 2016), available at: https://
www.sba.gov/sites/default/files/advocacy/SB-FAQ-
2016--WEB.pdf.
\2\ Id.
As chair of our Small Business Council, I have the
opportunity to hear from our members on a regular basis. Their
stories are compelling and one cannot help but empathize with
---------------------------------------------------------------------------
the difficulties faced by these business owners.
Access to Capital
The challenge of obtaining capital has been a consistent
theme for small businesses. It is, however, the very
fundamental component that drives innovation and business
growth. Small businesses do not have large cash flows, cash
reserves, or emergency funding. Therefore, access to capital
plays a paramount role in economic growth and job creation.
While passage of the Dodd-Frank law may have calmed fears
of another financial meltdown, an unintended consequence of the
law has been limiting small businesses' access to capital.
Natalie Kaddas is an example of the unintended consequences
of Dodd-Frank. Kaddas Enterprises is an active member of the
Salt Lake Chamber of Commerce and I met Natalie through our
mutual leadership in Salt Lake City. Kaddas is a 50-year old
plastic molding manufacturing firm and a few years ago they
secured an international contract for their
BirdguarDTM product. Natalie thought this incredible
opportunity was the time to take an entrepreneurial leap
forward and build a new facility. They immediately filled out
bank applications, and worked with a realtor and contractor to
begin the process. Hopes were dashed when three banks with
Small Business Administration (SBA) guarantees turned them
down. Land was pledged, collateral offered, but like so many
others, Kaddas didn't make it high enough up the point system
for any bank to consider the loan.
Personally, my company faced the exact same problem. We
were awarded the exclusive contract for all food and beverage
services at our new performing art center that opened in
November 2016. It required that we make the investment to equip
three on-site kitchens and all the necessary small wares. This
annual multi-million dollar contract gave us the opportunity to
expand. We would increase from a staff of 50 to well over a
hundred within a few months. We met with three banks and our
regional SBA representative. We have had four very successful
loans through SBA and all repaid ahead of schedule. The bottom
line, all three banks turned us away. How could we fulfill our
obligation to this contract without financial backing?
We looked for other sources of revenue. We learned of an
economic development grant offered by our city. We applied and
received 1/3 of the necessary funds needed. We made due,
equipping only one kitchen and pulling used small wares from
our catering operation. We halted a remodel to our main
catering facility to accommodate the additional inventory and
servicing the theater. We used much of our profits from 2016 to
purchase the most critical items with the hope that 2017 would
be a good enough year to see us through any additional
challenges. It left us with little working capital and no
reserves. It simply should not be this hard for businesses to
get access to the capital they need.
Competitive Workforce
In his State of American Business address, the President &
CEO of the U.S. Chamber of Commerce, Tom Donohue, expressed his
concern regarding a competitive workforce. He stated, ``A well-
trained, well-educated workforce is also critical to driving
economic growth--and to making sure all Americans have a
genuine opportunity to share in that growth. ...[W]e need to
help young people, as well as adults who need retraining,
obtain credentials--degree, certificate, or otherwise--that are
valued in the labor market. We need to encourage work-based
learning opportunities and develop more partnerships between
local business communities and local educators.'' \3\
---------------------------------------------------------------------------
\3\ Tom Donohue, 2017 State of American Business Address, U.S.
Chamber of Commerce (January 11, 2017), available at: https://
www.uschamber.com/speech/2017-state-american-business-address.
The lack of a skilled workforce is challenging for all
businesses no matter the size. For small businesses, access to
job seekers with the skillset needed is a tedious and time-
consuming task. When the Goldman Sachs 10,000 Small Business
initiative partnered with Babson College to study small
business issues, they discovered that over 70 percent of small
businesses find it difficult to hire qualified employees.\4\
The main reason cited was that potential candidates lack the
requisite skillsets.\5\
---------------------------------------------------------------------------
\4\ Babson College, The State of Small Business in America 2016
(June 24, 2016), available at: http://www.goldmansachs.com/citizenship/
10000-small-businesses/US/news-and-events/babson-small-businesses/
multimedia/babson-state-of-small-business-in-america-report.pdf.
\5\ Id.
I commend the U.S. Chamber of Commerce and its efforts to
address these issues. A priority for the Chamber is to improve
the workforce system by working with Congress to reauthorize
the Carl D. Perkins Career and Technical Education Improvement
Act of 2006. The law's reauthorization will help ensure
alignment between career and technical education (CTE) and
other workforce development laws, such as the Workforce
Innovation and Opportunity Act. Also, reauthorization will
continue the strong emphasis of developing CTE programs with
employer input, that reflect regional labor market needs, and
that are relevant and meaningful for students by providing them
with a path to a postsecondary degree or certificate or to
---------------------------------------------------------------------------
high-skilled, high-paying jobs.
Another Small Business Council member, Ashok Krish, is a
good example of how small tech firms are struggling to keep up
with staffing needs. Ashok is the owner of Kaizen Technologies
in Edison, New Jersey. There are over 3,000 IT firms in the
tri-state area and his needs for highly skilled workers cannot
be met without a reliance on foreign professionals who can work
for him under the H-1B Visa program. Like many small business
owners, Ashok works with his state's labor department and
assists in training programs for those returning to the
workforce. Even with his networking, good will, and resources
devoted to training potential hires, Ashok needs to utilize the
H-1B Visa program so he can fill the technical positions he has
available to meet the growing demand for these skills.
Many small businesses have partnered with trade schools
offering their students paid internships. Large corporations
are offering recent high school graduates good pay with on-the-
job training with a guarantee of a high-paying job upon
completion of their education. Small business owners are
feeling the pressure that their future workforce will no longer
be available.
Regulations
A supportive regulatory environment is essential to protect
the general public and help guide sound business practices.
Over regulation is burdensome and the recent upsurge in
regulations over the past several years has left business
owners overwhelmed and concerned.
As noted by J.D. Foster, Chief Economist for the U.S.
Chamber of Commerce, ``Regulations have costs that go far
beyond the simple calculations presented. They also create
uncertainty among affected businesses as they wait for the
regulations to come out, become final, and then become
internalized within the business. Perhaps even more important,
when businesses are subject to such an onslaught of regulations
in complete disregard to the economic damage they inflict, and
especially in combination with other policies such as the
administration's enacted and proposed anti-growth tax policies,
the net result is to create at least the appearance of an
antagonistic attitude toward businesses. Businesses can then
become overly cautious and defensive and these consequences
appear in the declining business investment in [the middle two
quarters of 2016].'' \6\
---------------------------------------------------------------------------
\6\ J.D. Foster, Declining Labor Productivity; Both a Symptom and a
Warning, U.S. Chamber of Commerce, Above the Fold (August 11, 2016),
available at: https://www.uschamber.com/above-the-fold/declining-labor-
productivity-both-symptom-and-warning.
The Chamber has heard loudly from its small business
members about the problems with the torrent of federal
regulations emanating from Washington, DC. Research conducted
by the U.S. Chamber of Commerce Foundation probes into the
costs of red tape on small business and spells out how the $1.9
trillion annual cost of federal mandates is a drag on the
American economy. The Foundation study includes a survey of
leaders from local chambers of commerce who are alarmed by the
slump in new business startups and insist that federal
regulations are largely to blame.\7\
---------------------------------------------------------------------------
\7\ Michael Hendrix, Regulations Impact Small Business and the
Heart of America's Economy, U.S. Chamber of Commerce Foundation, Above
the Fold (March 14, 2017), available at: https://
www.uschamberfoundation.org/blog/post/regulations-impact-small-
business-and-heart-americas-economy.
I am proud of the members of the Chamber's Small Business
Committee for voicing concerns to agencies and to Congress
about problems with red tape. From the overtime rule to the
fiduciary rule to minimum wage thresholds and problems with the
Affordable Care Act, we have worked with policy committees at
the Chamber and have testified before your Committee and others
to try and bring some ``Main Street common sense'' to
---------------------------------------------------------------------------
regulatory policy decisions here in our nation's capital.
I also greatly appreciate this Committee's work to address
the problems associated with unnecessary, duplicative, or
excessive federal red tape by guaranteeing that small business
stakeholders like me have a place at the table when regulatory
decisions are made. That is the concept embodied in H.R. 33,
the Small Business Regulatory Improvements Act that passed the
U.S. House of Representatives. I hope the Senate takes up the
measure soon.
Closing Remarks
In closing, Tom Donohue, in his January State of American
Business Address, said, ``if we are able to move our economy
from 2 percent growth to 3 percent growth, that's not a one
percent increase in our performance--it's a 50 percent
increase. Yet ultimately, growth is not about numbers. Growth
is about people. Increasing our growth rate 50 percent or more
would have an extraordinarily positive impact on jobs, incomes,
and opportunities--not just for the few, but for the many.''
\8\
---------------------------------------------------------------------------
\8\ Tom Donohue, 2017 State of American Business Address, U.S.
Chamber of Commerce (January 11, 2017), available at: https://
www.uschamber.com/speech/2017-state-american-business-address.
New opportunities for entrepreneurs, beginning with tax
reform, regulatory reform, and other priorities, would result
in an economic vigor that would benefit every family across
this country. A health care program that meets the needs of our
citizens with reasonable costs would spark new optimism. We
understand the serious work that must be done to solve many of
these issues. We are here to support and work with you to
---------------------------------------------------------------------------
stroke an economy where opportunities abound.
Thank you for the opportunity to speak with you today and I
look forward to any questions you may have.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Good morning. Chair Chabot, Ranking Member Velazquez and
distinguished Members of the Committee, thank you for the
opportunity to testify. My name is Anne Chambers, and I am the
owner of two businesses in Cincinnati, Ohio - Red212, an
independent content strategy agency that offers digital,
traditional, and cultural solutions, and Jambaar, a video
creation company providing data and technology for business
growth.
Today, I am here representing Women Impacting Public Policy
(WIPP), an organization of which I am a member. WIPP is a
national nonpartisan organization advocating on behalf of women
entrepreneurs - strengthening their impact on our nation's
public policy, creating economic opportunities, and forging
alliances with other business organizations.
First, let me thank the Committee for holding this hearing.
WIPP is appreciative of the bipartisan efforts of this
Committee to advance the agenda of women entrepreneurs
including accessing capital, accessing federal markets, and
providing a business-friendly environment.
Few topics are as timely as today's hearing: Making
Washington Work for America's Small Businesses, as women
business owners are a strong economic force that make up a
third of all American businesses. We are growing at a rate four
times the rate of male owned firms, and contribute over $1.6
trillion dollars to the nation's economy.\1\
---------------------------------------------------------------------------
\1\ 10 Million Strong: The Tipping Point for Women
Entrepreneurship: 2015 Annual Report. National Women's Business Council
(2015).
To provide information on the issues most important to
women entrepreneurs, WIPP has prepared an economic blueprint
which sets a bold, comprehensive set of public policy
expectations on behalf of the women's entrepreneurship
community. The Economic Blueprint expresses our voice and our
interests regarding the pressing business challenges that
require action by our elected officials. My testimony outlines
---------------------------------------------------------------------------
many of the blueprints core principals.
Economy
Government and private sector efforts should be focused on
increasing investments that drive economic growth. Policymakers
are responsible for ensuring the business environment is
conducive to growth and that the federal government is a wise
steward of tax payer dollars.
1) Investment in Entrepreneurship Pays Off
Over 36% of American businesses are women-owned, a segment
growing at four times the rate of men-owned businesses.\2\
Critical support for these entrepreneurs includes access to
credit, access to the federal sector and access to training and
counseling. Doing so maximizes their already sizable impact:
contributing $1.6 trillion annually to the economy and
employing nearly 9 million Americans.\3\
---------------------------------------------------------------------------
\2\ Id.
\3\ Id.
2) Provide Women-Owned Businesses with Certainty in
---------------------------------------------------------------------------
Economic Policy and Regulations
Federal regulations cost businesses just under $10,000 per
employee annually, with the annual total cost burden on the
typical U.S. business coming in at a $233,182.\4\ This problem
is exacerbated by the government's inability to provide long-
term policies on which businesses can rely. Whether it is the
continued threat of government shutdown in the annual budget/
debt ceiling debate, steep spending cuts across the government,
or even retroactive tax credits, women entrepreneurs are often
left to guess at government outcomes affecting their
businesses.
---------------------------------------------------------------------------
\4\ W. Mark Crain and Nicole V. Crain, ``The Cost of Federal
Regulation to the U.S. Economy, Manufacturing and Small Business,''
National Association of Manufacturers (September 2014).
WIPP appreciates the support of this committee to ease the
regulatory burden on small businesses. In particular, we would
like to thank Members of the Committee for their support of the
---------------------------------------------------------------------------
following legislation:
H.J. Res 37, which nullifies the Federal Acquisition
Regulation (FAR) contractors blacklisting rule. While the
intent of the rule, to keep bad actors from doing business with
the government, is good, the execution was too burdensome for
contractors.
H.J. Res 83, which nullifies the Department of Labor (DOL)
rule that would enable the agency to cite employers for record-
keeping violations up to five years old.
The Regulatory Accountability Act (H.R. 5), which would
strengthen the Small Business Administration (SBA) Office of
Advocacy and allow for the issuance of smarter, less burdensome
regulations that consider the direct economic effects on small
businesses.
The Regulations from the Executive in Need of Scrutiny
(REINS) Act (H.R. 26), which would send new rules that will
have a significant impact on the economy to Congress for an up
or down vote before they can be implemented.
Tax
A Congressional tax overhaul should include an equitable
reform of tax rates for all businesses. Given that 90% of all
businesses in the U.S. are pass-through, entities, reform
should address the individual as well as the corporate tax
rate.\5\ On the Federal level, pass-through entities are
subject to a top individual tax rate of 43.4% and up to an
additional 13.3% for state and local taxes.\6\
---------------------------------------------------------------------------
\5\ Scott Greenberg, ``Pass-Through Businesses: Data and Policy,''
Tax Foundation, (January 17, 2017).
\6\ Id.
---------------------------------------------------------------------------
WIPP supports:
Reforming the tax code to make deductions
and credits equitable no matter what the structure of
the company
Permanently repealing the estate tax and
allowing small businesses to pass from one generation
to the next
Simplifying the tax code for small
businesses to reduce the imbalanced cost of compliance
versus large businesses
Access to Capital
Capital is the lifeline of business and the ability to
secure capital is often the determinant of an entrepreneur's
opportunity to start or grow a business. For women, however,
accessing capital continues to be difficult. Women-owned
businesses ask for less funding - on average, $35,000 dollars
less than male-owned counterparts.\7\ Yet, women receive just
16% of all small business loans made each year.\8\ A
Congressional report on women entrepreneurs found that women
only receive 4% of all commercial loan dollars.\9\
---------------------------------------------------------------------------
\7\ Jared Hecht, ``State of Small Business Lending: Spotlight on
Women Entrepreneurs,'' Fundera Ledger (September 6, 2016).
\8\ Id.
\9\ U.S. Senate Committee on Small Business and Entrepreneurship,
Majority Report, 21st Century Barriers to Women Entrepreneurship (July
23, 2014).
WIPP's annual membership survey regularly finds that women
must make multiple attempts to secure bank loans or lines of
credit - with a full 40% never succeeding. Yet, women make up
one-third of business owners, generating more than $1.6
trillion annually in receipts, and growing at 1.5 times the
rate of average businesses.\10\
---------------------------------------------------------------------------
\10\ Supra, note 1.
In response to this crisis of capital, WIPP proposes the
following policy-based solutions to spur lending to fuel the
---------------------------------------------------------------------------
innovation and success of women entrepreneurs.
1) Changing the Capital Infrastructure
Simplify Intellectual Property Protections
Traditional and alternative investors are increasingly
interested in the intellectual property (IP) value of companies
seeking funds. Women entrepreneurs, however, lag significantly
behind male counterparts in filing patents.\11\ Additionally,
simplifying the IP patent process for entrepreneurs will
catalyze interest in investment smaller firms.
---------------------------------------------------------------------------
\11\ Margaret E. Blume-Kohout, ``Understanding the Gender Gap in
STEM Fields Entrepreneurship,'' SBA Office of Advocacy (October 2014).
---------------------------------------------------------------------------
Re-think Credit Scores
Lending decisions relying on credit scores, employment
history and income are undermined by the many studies that show
women lag behind male counterparts in pay.\12\ Beyond pay
discrepancy, antiquated scoring models disproportionately
hinder women entrepreneurs seeking loans.
---------------------------------------------------------------------------
\12\ The Simple Truth About the Gender Pay Gap, American
Association of University Women (2017).
FICO introduced in 2014, and adopted in 2016, an
alternative credit scoring system that would allow up to 15
million previously ``unscorable'' Americans to be scored based
on alternative data. This includes payment histories, utility
bills, cable bills, cellphone bills, and public record
information (e.g., address history). This alternative scoring
model may also help give lower lending rates based on a higher
credit score. These modernizations in the credit industry hold
great promise for women entrepreneurs and should be utilized in
---------------------------------------------------------------------------
government lending programs.
Develop Female Fund Managers through ``Emerging Managers''
SBIC Program
Venture capital (VC) continues to be elusive to women who
need it. Less than 10% of overall VC funding goes to women-
owned companies.\13\ Data from Small Business Investment
Companies (SBICs) licensed by the SBA, show women receive only
3% of investments.\14\ Few fund managers are women. In a
classic ``chicken and egg problem,'' many women cannot gain the
requisite portfolio managing experience to become a fund
manager, leading to a cyclical exclusion of women managers--
ultimately preventing women from lending to women.
---------------------------------------------------------------------------
\13\ JMG Consulting, LLC & Wyckoff Consulting, LLC, Venture
Capital, Social Capital, and the Funding of Women-led Businesses, SBA
Office of Advocacy (April 2013).
\14\ Annual Report Fiscal Year 2014, The Small Business Investment
Company Program (2014).
Creating an ``Emerging Managers'' track in the SBIC program
and allowing these managers to engage in equity-based financing
would help develop a generation of female fund managers, who in
---------------------------------------------------------------------------
turn would increase the VC opportunities for women-owned firms.
Tax Incentives for Angel Investors
According to the Angel Capital Association, an estimated
300,000 people have made an angel investment in the last
several years.\15\ The same estimates found a potential of 4
million investors nationwide. Incentivizing this kind of
capital should be a priority.
---------------------------------------------------------------------------
\15\ FAQ: The Value of Angel Investors and Angel Groups, Angel
Capital Association (2013).
More than half of U.S. states offer tax incentives for
angel investors.\16\ Creating a federal tax credit mirroring
state models, would increase angel investment at the critical
early stage, such as Connecticut's. Federal support could
include: grants, matches, or a dedicated fund. Additionally, to
the extent possible, tax credits could be designed to
incentivize angel investment in women-owned businesses.
---------------------------------------------------------------------------
\16\ State Angel Investor Tax Incentive Programs, Angel Capital
Association (accessed March 16, 2017).
---------------------------------------------------------------------------
2) Supporting Small Lending Institutions
Ending a ``One-size-fits-all'' Approach to Regulation
Currently, banks and credit unions of all sizes largely
face the same requirements under Dodd-Frank reforms. Small
regional and community banks have the highest approval rate for
small business loans. For example, community banks lent $2.6
trillion in loans to consumers, small businesses and the
agricultural community.\17\ Yet, community banks have struggled
with compliance and the regulatory environment that allows them
to lend to small businesses. Congress should enact legislation
to address the regulatory relief needed for smaller lending
institutions.
---------------------------------------------------------------------------
\17\ Independent Banker 2017 Media Guide, Independent Community
Bankers of America (2017).
---------------------------------------------------------------------------
Lift the Credit Union Lending Cap
A cap limits most credit unions to lending no more than
12.25% of their assets to small businesses.\18\ Credit unions
could lend an additional $16 billion to small businesses if
Congress increased the statutory cap on credit union business
lending.
---------------------------------------------------------------------------
\18\ H.R. 1151, 105th Cong. (1998).
---------------------------------------------------------------------------
3) Strengthening Government Investment
Accelerate SBIR Commercialization
Innovative products are developed for government use
through the Small Business Innovation Research (SBIR) program,
which has three phases. Federal support generally ends after
the second phase of meeting the government needs. The
Department of Defense (DoD) has successfully utilized the Rapid
Innovation Fund (RIF) to commercialize SBIR technology. A RIF
fund should be created at all federal agencies conducting
research and development, to enable the government to purchase
innovative products and services from small businesses.
Additionally, agencies could also model the third stage
commercialization of SBIR products on a public-private
partnership to bring a pipeline of innovative products -
already proven for government use - to market.
Modernizing the SBA Microloan Program
Women are the biggest users of loans under $50,000,
accounting for 45.2% of loans made through the SBA Microloan
Program in Fiscal Year 2016.\19\ Not only should Congress
continue to fund this program, they should also modernize it.
WIPP looks forward to working with this Committee to remove
limitations on technical assistance and allow for funds to be
distributed more effectively.
---------------------------------------------------------------------------
\19\ U.S. Congressional Research Service, Small Business
Administration Microloan Program (R4 1057, Dec. 6, 2016) by Robert Jay
Dilger.
Provide Adequate Resources for Financial & Business
---------------------------------------------------------------------------
Counseling
Obtaining assistance and coaching is the first key step in
the capital access process. Businesses that receive assistance
have an 80% success rate, compared to the 50-80% mortality rate
for small businesses overall.\20\
---------------------------------------------------------------------------
\20\ Briding the ``Pioneer Gap'': The Role of Accelerators in
Launching High Impact Enterprises, Aspen Network of Development
Entrepreneurs (accessed March 21, 2017).
Congress should adequately support organizations such as
Women's Business Centers, Small Business Development Centers,
and other non-profits that provide financial counseling and
prepare women to obtain capital. Traditionally funded by the
Small Business Administration, the Department of Agriculture,
and the Department of Treasury, investing in these programs
will ensure that business owners receive the coaching they need
---------------------------------------------------------------------------
to be a part of the 80% of businesses that succeed.
WIPP appreciates the efforts of this committee to enable
women entrepreneurs to secure the capital necessary to start
and expand businesses. We look forward to working with this
Committee to make changes necessary to support all
entrepreneurs.
Procurement
In FY2015, for the first time, 5.06% of all government
contracts were awarded to women-owned businesses.\21\ While
reaching the contract goal is certainly a milestone, a report
issued by the U.S. Department of Commerce showed that women-
owned businesses are still 21% percent less likely than male
counterparts to be awarded a federal contract.\22\ Below are
WIPP's suggestions to correct that inequity.
---------------------------------------------------------------------------
\21\ SBA Press Release: Federal Government Breaks Contracting
Record for Women-Owned Small Businesses (March 2, 2016) available at
https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-
advisories/sba-federal-government-breaks-contracting-record-women-
owned-small-businesses.
\22\ David N. Beede, Robert N. Rubinovitz, Utilization of Women-
Owned Business in Federal Prime Contracting, Report Prepared for the
Women-Owned Small Business Program of the Small Business Administration
(December 31, 2015).
1) Ensure Acquisition Reforms Support Women-Owned
---------------------------------------------------------------------------
Businesses
Last year, WIPP published a report, Do Not Enter: Women
Shut Out of U.S. Government's Biggest Contracts. The report
showed that women have limited opportunities to win some of the
government's largest contracts, also known as Multiple Award
Contracts (MACs). We Urge Congressional action to require the
SBA to conduct a comprehensive study on the participation of
all small businesses on MACs. WIPP will work to ensure that
agencies structure MACs to include all socio-economic groups,
including women.
The continued effort to implement broad reforms in
government procurement has not fully taken into consideration
the damaging impact on small businesses. WIPP urges Congress to
ensure that procurement reforms, including government-wide
acquisition initiatives like category management, take into
consideration impacts on government contractors, while also
supporting the government's fundamental goal of getting ``best
value'' in federal procurement.
2) Adequately Support and Train the Contracting Workforce
Procurement professionals struggle to keep up with changes
to acquisition policy. Often these changes are designed to
benefit small, minority, or women-owned businesses. New
contracting policies, like sole source authority in the WOSB
Program, should be explained to the government acquisition
workforce to ensure changes passed by Congress are fully
utilized by federal buyers.
3) Sole Source Parity
In 2015, WIPP pressed for--and achieved--the swift
implementation of sole source authority to the WOSB Procurement
Program. The WOSB sole source is limited to contracts valued at
$6.5 million or less for manufacturing and $4 million or less
for all other procurements.\23\ While the WOSB sole source was
being finalized, the amount for manufacturing sole source was
increased from $6.5 million to $7 million for other socio-
economic groups. We urge the Committee to ensure that WOSB sole
source for manufacturing is also raised to $7 million.
---------------------------------------------------------------------------
\23\ 80 C.F.R. Sec. 251 (2015).
---------------------------------------------------------------------------
Healthcare
Small businesses face higher administrative and premium
costs for health insurance. This puts women entrepreneurs at an
inherent disadvantage, as health insurance is an important
benefit to attract and retain employees. Congress and the
Administration should implement the healthcare reforms
targeting this inequity.
1) Implement a Strong Pooling Mechanism for the Small Group
Market
The Affordable Care Act (ACA) established SHOP exchanges,
but only on a statewide basis. Prior to the ACA, WIPP supported
the concept of Association Health Plans (AHPs), which would
have allowed small businesses to pool their buying power
through associations in order to purchase healthcare across
state lines. While WIPP supported the mechanism of state
exchanges in the ACA, WIPP urges Congress to consider
structuring the purchasing pools to maximize small business
participation by revisiting the ability to shop across state
lines.
2) Define Work Weeks as 40 hours
The Affordable Care Act defined a full-time worker as
working thirty hours a week. The definition matters for
defining whether a business is exempt from the employer mandate
(under 50 FTEs is exempt). WIPP supports efforts to define the
workweek traditionally, as forty hours. When revising health
care legislation, WIPP urges Congress to define the workweek as
40 hours, if the employee mandate is retained.
3) Allow Health Insurance Deductions for the Self-Employed
WIPP supports reforming the tax code to make deductions and
credits equitable, no matter what the structure of the company.
WIPP looks forward to working with Congress to ensure that
any reform to health care addressed challenges for women
business owners.
Conclusion
Opportunities for the nation's ten million women
entrepreneurs have never been stronger, but challenges still
remain. WIPP's economic blueprint outlined in this testimony,
provides solutions to improve in a number of key areas
including: tax, access to capital, health care, and
procurement. This Committee has always acted in a bipartisan
manner to support women entrepreneurs and we appreciate your
interest in our input, making sure that the challenges of women
entrepreneurs are considered.
Thank you for the opportunity to testify and I am happy to
answer any questions.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Chairman and distinguished Members, thank you for
inviting me to present testimony before the Committee regarding
my company.
I am a fourth generation florist. In 1923, my great-
grandfather opened a flower shop and greenhouses outside
Baltimore where he grew and sold flowers and plants. My
grandparents took over the business in the 1950's and ran it
until my parents took over in the 1970's.
When I joined the business in a full-time capacity in 2002,
our family owned two retail flower shops and had just under 20
total employees, of which 8 were considered full-time. Soon
thereafter, I realized there was an opportunity to grow our
business by acquiring additional locations. In 2007, I
purchased my first location and have continued to acquire
retail flower shops.
In 2009, we expanded beyond traditional retail to include a
wholesale florist and import division. Last year my company
employed over 180 people and operated at 12 different locations
in Maryland and New Jersey, including my great-grandfather's
original location outside Baltimore.
My company employs about 90 people on any given day--about
25 full-time and 65 part-time. Seasonal increases for the peak
periods of Valentine's Day, Mother's Day, and Christmas will
almost double our daily workforce.
Our operation is multi-channel--we service import,
wholesale, and drop-ship segments of the floral industry.
However, our main street retail existence remains our largest
presence within the flower business. Through our local brands,
we deliver smiles to the faces of nearly 100,000 people each
year. Our company receives numerous awards every year at both
the local level as well as the national level.
Our employees are the heart of our business. They are the
ones who comfort grieving families, share hugs with new
grandparents, and see true love between couples preparing for
weddings. We have always taken care of our employees.
We were offering health care decades before Affordable Care
Act (ACA) required us to. We established a company-sponsored
retirement plan when we realized that Social Security might not
be enough for our retirees. We have a paid leave program that
is extremely competitive for retail business and nearly unheard
of in the floral industry.
As a result, we have many valued employees who have made a
lifelong career with us. It is important to note that our
company attracts talent by offering competitive wages and
benefits because we want to, not because we are forced to.
Having the opportunity to set ourselves higher than required
allows us to maintain a competitive employment environment.
While the overall economy is certainly in better shape than
it was several years ago, it is important to understand that
our industry and small businesses all over the nation are still
experiencing significant challenges which are preventing
entrepreneurs from fully attaining the American Dream.
Since several years have elapsed since full implementation
of the ACA, we have had an opportunity to see firsthand the
devastating impacts that have occurred as a result of the
legislation. I want to share my experience with the ACA in an
effort to encourage Congress to pass legislation to correct the
devastating impacts the ACA has had on my business and ability
to offer quality health care insurance to my employees.
It is important to note that while I support employer-
sponsored health care for true full-time employees as evidenced
by my company's insurance offerings for multiple decades, the
current mandate for employer-sponsored health care simply is
not working.
I received renewal quotes from our health insurance broker
a few weeks ago. Our premiums will be increasing by over 30%,
and the past several years have seen similar surges. Increases
of that magnitude are simply not sustainable. Since the
enactment of the ACA, our monthly premiums have nearly doubled
and our deductibles have nearly tripled.
In my opinion, it is not wise federal policy to force us to
pay significantly more for substantially less coverage.
In addition to skyrocketing costs and reductions in
benefits, the ACA has placed me at a competitive disadvantage
because of the cost of insurance. The actual employer's cost to
insure a full-time employee on our health insurance policy adds
over $2.00 an hour that ACA defined ``small employer''
competitors do not incur. This burden places me at a
disadvantage since many other employers are not required to
offer coverage to the same individual and can therefore afford
to entice them with a higher salary.
For an hourly-based employee making $14 an hour, that $2 an
hour is a significant monetary factor and often times makes the
difference between working for us and taking a job elsewhere.
Additionally, since many other employers are not required to
offer coverage to their employees, the employee can still
benefit from subsidies on the exchange which they would not
have access to under employment with me. The result is a
variance in net expendable income to an employee of thousands
of dollars a year, which to someone making $20,000-$30,000 a
year creates a significant difference of their income.
I ask Congress to fix the broken ACA system. It is
detrimental to me and countless other main street businesses.
If something is not done quickly, I fear that when I receive
next year's health insurance quote it will simply be
unaffordable to the point where we would no longer be able to
offer that benefit to our employees.
I applaud the recognition by Congress and the
Administration that the Tax Code, which seems to be so large
that not even my accountant can fully understand it, needs to
be drastically simplified.
Tax relief to small business is incredibly important. The
complexity of the Tax Code and its associated case law is not
something that I can even begin to understand. Payroll taxes
are simple, straightforward to calculate, and easy to plan
for--we need something just as uncomplicated for corporate and
pass-through taxes.
The tax rate also needs to be lowered. The United States
has the highest corporate tax rate in the developed world and
its obviously too high. Our current tax system discourages
hiring and growth. The high tax rate forces businesses to make
decisions on how lower their net tax rate rather than how to
grow their businesses and hire more employees.
While I highly commend efforts to reform our tax code, the
border adjustment proposal would be devastating to my business.
Eighty percent of the flowers sold in the United States are
imported. Nearly 95% of the flowers used in my businesses are
grown overseas. There is no domestic capacity to meet the
demand. Flowers are not a necessity like food or housing--if
our products are taxed at a higher rate, those costs will
translate to higher prices and consumers will shift their
spending to other products where flowers have traditionally
been appropriate.
I ask that any border adjustment in tax reform exempt
floral agricultural products to avoid significant harm to small
floral businesses nationwide.
One of the greatest concerns that I and other members of my
industry have is the sense of uncertainty and lack of clarity
in legislation and regulations. It is impossible for small
businesses to make decisions and plan when legislation and
rules are constantly changing. I have discussed the challenges
I face with several of my peers in different segments of the
floral industry. Every single person told me their greatest
concern was either uncertainty or lack of clarity.
For example, when regulations changing overtime policy were
issued, I, along with many of my peers, recreated the entire
compensation structures for our full-time employees to conform
to the new regulations.
Being in a somewhat seasonal business, we had previously
offered our salaried employees the opportunity to bank extra
hours worked during peak weeks and redeem them as additional
paid time off during other slower periods. Our employees had
always viewed this as a benefit that allowed them to maintain
consistency in their cash flow throughout the year.
Because the overtime rule forced us to restructure our
compensation structure, our workplaces were highly disrupted. I
even had one employee quit after we informed her that she would
not be able to accrue comp time during peak weeks. Please try
to imagine the frustration after we redesigned our compensation
plan only to have the regulation halted just days before it was
scheduled to go into effect.
There needs to be certainty in legislation and regulation
that allows small business owners to properly plan and prepare.
The current environment creates economic chaos where we are
unable to plan for payroll, benefits, or growth.
One of the greatest uncertainties that I have rests in the
handling of non-hard assets during acquisitions. There has been
little released about how assets such as trade names, phone
numbers, websites, and goodwill--normally depreciated over a
longer period of time, minimizing any benefit--would be handled
under any of the tax reform proposals being considered. I am
not comfortable continuing to expand my business without
knowing how those asset will be treated under a reformed tax
system. Constant political upheaval and shifting rules are
counterproductive to business growth.
In an era where many people only criticize our government,
I want to take an opportunity to say thank you. Recently a
number of significant challenges have been overcome thanks to
the support of our legislators. I urge the committee to
celebrate these prior successes as we all work together to make
the future brighter.
While the Affordable Care Act remains substantially intact,
there have been some requirements under the ACA which have been
reviewed and changed to assist small businesses. For example,
the original ACA legislation required 1099 reporting
requirements which would have been overly burdensome,
especially on small business. Through bi-partisan cooperation,
this burdensome provision was removed. I am hopeful that
Members of Congress will continue to work to eliminate many of
the other tedious reporting provisions with which small
businesses have struggled.
The Estate Tax has been an ongoing issue for small
business, especially in multi-generational businesses where the
business itself sits upon real estate which has been passed
down from one generation to the next.
I applaud the efforts over the years by legislators to keep
Estate Tax levels at a level which allows for transition of
small businesses from one generation to another without forcing
family members to take out life insurance policies or loans to
pay the taxes which might occur as a result of the death of a
family member. I urge Congress to continue to maintain a
vigilant watch on Estate Tax levels and concepts to allow for
small businesses to continue to grow and pass from one
generation to the next without fear of losing the business from
a tax liability incurred by the death of an owner.
Following the recession a decade ago, financing for my
business became very difficult. Credit lines were cut or closed
and it was nearly impossible to find a bank that was able to
write a loan for small business. I have been fortunate to have
a local community bank to work with--one who knows us as people
and a business, not just an account number. Policies should
encourage the continuity of small and local banks as a
financing partner for small business.
While Congress has passed legislation over recent years to
help small business, the work remaining is immeasurable. I
implore the Committee to be our voice in Washington and to
craft legislation to address some of the concerns that I have
shared with you.
Small businesses should not be punished by their own
government for contributing to economic growth and hiring
employees.
I am hopeful that this Committee and this Congress will act
to give a degree of certainty and clarity to business and to
craft and pass legislation which will lead small business into
a new era of prosperity. I am hopeful that my great-
grandchildren will be able to take the reins of the family
business 94 years from now. I know that my 5-year old is
already considering joining the business.
Thank you again for giving me the opportunity to present
this testimony before the Committee.
Statement of David Borris, Main Street Alliance Executive
Committee Member and Business Owner For House Committee on
Small Business Hearing on ``Making Washington Work for
America's Small Businesses.''
Wednesday, March 22, 2017
Chairman Chabot, Ranking Member Valezquez, and members of
the committee:
Thank you for the invitation to testify today regarding the
ways our federal government can work for small business owners.
My name is David Borris and I serve on the Executive
Committee of the Main Street Alliance, a national network of
small business owners. Our network creates opportunities for
small business owners to speak for ourselves on matters of
public policy that impact our businesses, our employees, and
the communities we serve.
I've been a small business owner for 32 years. My wife and
I opened a homemade food store in 1985, and over the years have
expanded into a full service catering company with 33 full-time
employees and up to 80 more part-time and seasonal workers. We
take great pride in what we do.
Businesses need safety, transparency, and predictability in
order to thrive. For today's discussion, I would like to focus
on what Washington and the federal government can do to help
ensure that those basic vital conditions are met so that my
business, and small businesses across the country, can succeed.
This starts with ensuring that my employees, my family, and
I can access affordable, high-quality health coverage. With the
passage of the Affordable Care Act (ACA), premium increases for
my company stabilized immediately. My company is no longer
vulnerable to dramatic spikes in premiums based on the health
condition of a single employee, and there are now basic
standards of accountability and coverage to ensure that my we
are getting a fair deal. Instead of spending my time sifting
through insurance plans or acting as an H.R. Director, I can
devote my resources to innovating, growing my business, and
producing more jobs.
Second, the federal government has to ensure that we have
sensible, protective regulations in place. My business relies
entirely on a fundamental confidence that the food and water we
consume is safe because of government regulations and effective
oversight. Small business owners like myself also benefit from
federal financial protections, which, as we know, are even more
scarce for us than on the consumer side.
Finally, what businesses like mine require more than
anything from our federal government are evidence-based
policies that keep overall consumer demand strong. In short, I
need the bell on the front door to keep ringing, and that
depends on a prosperous middle class with enough disposable
income to spend on my goods and services. Policies like a fair
$15 minimum wage, strong federal investment in infrastructure,
and comprehensive immigration reform.
Small Businesses Need Affordable, High Quality Health Care
In 1992, when we began offering health care, we had grown
to 8 full time employees, and felt a moral obligation to do
right by the people who were making our life's work theirs as
well. We implemented a structure whereby employees would
contribute 50% of the premium in their first year of coverage,
and Hel's Kitchen would pick up the entire program thereafter.
We continued to grow and expand, and this structure worked well
for some time.
Beginning around 2002, though, we began to experience a
series of annual, often volatile, premium increases. In 2004,
it was a 21% increase; in 2005, 10%; 2006, 16%; 2007, 17%; and
a change in carriers to avoid the quoted 26% increase. And in
2008, we were finally forced to ask long time employees to
contribute more again because the 17% increase was simply too
much for us to absorb. In 2008, I spent almost 13% of my
covered employees' payroll on health insurance premiums. Now,
that is down to a little over 9%.
Runaway health care rates were a significant drain on my
resources, as I witnessed insurance costs consuming an ever-
increasing share of my business income. But even more
challenging was the unpredictability of our premiums. Premiums
could vary wildly from year to year depending on weather a
single employee or family member had an expensive illness.
For example, one of our lower wage employees, a dishwasher,
was great at his job, but suffered from a malady that required
kidney dialysis. When I met with my insurance broker to discuss
the premiums for the upcoming year and I asked about the steep
rise in my firm's premiums, he attributed the spike to the
illness of that one single employee.
The ACA has helped stabilize these costs and correct the
market failures that have disproportionately burdened small
business owners. This is one of the most direct ways to protect
small businesses and help us do our part to create jobs and
grow the economy. Insurers now are required to set rates using
a single risk pool that includes all enrollees across their
small group plans in the entire state. This means that my
business is no longer vulnerable to sharp swings in my rates
based on the health of a few employees.
Furthermore, insurance companies can no longer underwrite
based on health status--so no more charging higher premiums to
groups with employees who have a condition requiring expensive
treatment. Those costs now get spread over a much larger pool.
And, after years of enduring double-digit rate increases with
no recourse, insurers are now required to provide justification
for unreasonable rate hikes. And, because of Medical Loss Ratio
limits, insurance companies must pay back any excess premiums
collected at the end of the year. The health insurance industry
is unique in its high level of market concentration, but now
true competition--competition based on consumer value rather
than cherry-picking risk pools from year to year--is now
possible, because of the ACA.
I see these gains in my bottom line. My company has
witnessed an unprecedented slowdown in rate increases. Since
the passage of the ACA, our average annual increases are a
fraction of what they were before, averaging 4.6% for the seven
years from 2010 to 2017. I am saving money on premiums, and I
am plowing those savings back into business investment and job
creation.
The ACA also established minimum standards of coverage and
clarity in the benefits of our plan. As a caterer, I am a
foodservice professionals, not an insurance expert. I don't
have the time or bandwidth to pore over countless health
insurance plans. I want to know that any plan I purchase is a
fair deal--and that means it covers the basic needs of my
employees and my family, without surprises. Because of the
changes brought by the ACA, I have the security to know that
any plan I select will cover essential health benefits,
including maternity care, mental health and substance use
treatment and prescription drugs. My employees are now more
likely to have affordable access to health care that can keep
them healthy, and I can devote my time to growing my business
instead of administering health care.
Finally, I would be remiss if I don't address the enormous
gains in insurance coverage outside of the small group market.
For many of my colleagues just starting out their own
businesses, the risks they are taking on the chance to succeed
are daunting. But, thankfully, they no longer shoulder the
added anxiety of being deemed uninsurable.
The ACA and the individual marketplace it established are
freeing aspiring entrepreneurs to go out on their own. They are
taking advantage of this option. One in five Marketplace
enrollees is a small business owner or sole proprietor, and
small business owners are three times more likely to purchase
Marketplace insurance. This, plus the expansion of Medicaid,
has also provided insurance coverage to many employees working
in small businesses, particularly those in the lower-wage
service and food industries like mine.
Currently, 6.1 million people who work in small businesses
are enrolled in Medicaid, and 1.4 million employees have gained
coverage through the Exchange. These coverage gains are
significant steps to fostering an environment in which small
businesses can grow. It means we have a healthier workforce.
There is less demand on us as small business owners to
administer health insurance programs--valuable time we can
spend on improving our products. Most of all, the ACA has given
businesses the freedom to choose what makes the most sense for
their companies.
Small Business Owners Need Sensible Regulations to Protect
Them and Ensure Level Playing Field
Ideological rhetoric blaming government regulations for
slow small business growth is at an all-time high. Washington
has introduced numerous bills and executive orders aimed at
curbing regulations, saying that cutting them will be a
stimulus to our economy. Yet, as a small business owner who
deals with regulations on a daily basis, I believe these overly
broad attacks on regulations are actually harmful for small
business owners. An educated, more nuanced approach is deeply
warranted.
Let me begin with an obvious example close to home. I make
my living in the catering industry. On a daily basis, multiple
vendors deliver poultry, beef, and dairy products and fresh
produce to my back door. While I'm careful to check the
quantity or weight as it is delivered, and make certain the
quality is high, I know that I can trust that safety of the
food itself because of strong national industry regulations. If
I served tainted food at a catering event, people would be
hurt, my reputation would be shattered, and my business
destroyed. And foodservice operations are some of the largest
consumers of water in the country. We need powerful oversight
of food and clean water regulations to stay in business. If
Northbrook, Illinois were to ever go through what Flint,
Michigan went through, I would be out of business the next day.
The same holds true for my fellow small business owners who
operate toy stores, appliance showrooms, and machine shops.
Both they and their customers trust that the products they sell
are not defective or toxic, thanks to wise regulations.
Regulations provide the market with an undergirding of
confidence, a basic level of certainty to ensure we are
protected from tainted food, unsafe drugs, poisoned water, and
polluted air. We should not take these things for granted. We
see the problems that occur in other countries lacking the
stringent regulations that protect the public from the avarice
of those who would compromise public safety for a little more
short-term profit.
There are other regulations that help small business owners
by leveling the playing field against larger, more politically
connected, businesses. Anti-trust laws, for instance, give
small companies like mine a chance to compete by addressing
price discrimination, price fixing, and other unfair business
practices. And other regulations enforced under the Small
Business Administration ensure that small businesses are
prioritized for a certain set of government contracts.
Financial regulations that protect small business owners
are equally vital. Many, small business owners use consumer
financial products to fund their businesses, particularly
through temporary slow periods. Small business owners turn to
those types of loans, which are largely unfavorable and often
predatory, in times of desperation. It is vital that we have
transparent repayment terms, accurate credit reporting, and
fair mortgage and short term lending rates.
This doesn't mean the regulatory environment cannot be
improved. Navigating the bureaucratic and legal obstacles to
obtaining requisite permits or licenses is often difficult and
burdensome. But most of these regulatory challenges reside at
the local level. Cities, counties, and states have convoluted
and slow processes for new businesses, often designed for far
larger firms. Easing the burden will entail more coordination
among the various government agencies to determine whether any
processes can be combined. Washington can help by working with
state governments to provide clearer, accessible resources for
business owners seeking licenses and permits, and consolidating
this information into a single source of access. It can also
help by creating one-stop electronic filings of government
paperwork. But all of this should be done in a careful manner
that streamlines burdensome processes without stripping away
vital protections for us, our employees, and our customer base.
Small Business Owners Need Policies that Keep Consumer
Demand Strong
I would like to close by saying that I run my business in a
local way. My entire client geography exists within a 150-mile
radius of my central office. The single most important thing
small business owners need to be successful and to create more
jobs is more customers--more demand for our products and
services. Not tax breaks. Not fewer regulations. Not less
oversight. More customers.
Thus we need evidence-based policies that ensure our local
communities have a growing, thriving middle class that is not
weighted down with excessive debt. These policies include a
fair $15 minimum wage, strong federal investment in
infrastructure, and reasonable immigration reform.
While the off-shoring of jobs and a shift to overseas
markets have helped large corporations capture record profits,
a company like mine can't simply pull up stakes and relocate
somewhere across the globe. The health of my business is tied
to a healthy economy that has money circulating in a virtuous
cycle of rising wages, consumer demand, and job creation.
To accomplish this, we need, first and foremost, to raise
the federal minimum wage. Henry Ford understood the link
between well-paid employees and paying customers more than a
century ago when he recognized his business would only succeed
if his workers earned enough to buy the cars they were
building, and he doubled their wages overnight.
In our local economies, that same link applies: my
business' fairly paid employee is my neighbor business' paying
customer. When people in my neighborhood can't earn enough to
keep up with the basics--things like buying food, making car
repairs, or taking their family out to eat for a birthday or an
anniversary--the entire local economy becomes unstable. And
those families certainly aren't going to spend money on a
caterer. That's bad for small businesses like mine, and that's
bad for the economy as a whole.
Second, the federal budget needs to prioritize adequate
investment in local communities. This means putting dollars
into regional infrastructure, funding trainings for the
workforce, and creating financial stability for middle class
families. But that spending needs to drive long-term dollars
into the pockets of community workers. That is, it should not
be spent on low-wage labor that scrapes more profit off the top
because that profit is taken out of the community when the
project is complete. With these types of balanced, regulated
investments in our infrastructure, we'll have a stronger
customer base and more resources, which creates a positive
multiplier effect for small businesses everywhere.
Unfortunately, the President's budget blueprint does little
in this respect. It dramatically cuts infrastructure funding in
the Department of Transportation, the Department of Housing and
Urban Development, and the EPA; defunds job-training programs;
and underfunds after-school care, higher education training,
and childcare for working families. These cuts are concerning
for the future of my business and my community. I urge you to
reverse these proposed cuts, and to instead adequately fund
national programs that boost the economy.
Finally, sensible, comprehensive immigration reform is
important for an inclusive, healthy middle class. This country
is built on the innovation and drive of immigrants, and the
foodservice industry relies on the labor of my peers from all
over the world. In the 10th District of Illinois, there are
172,729 immigrant residents, including 5,766 entrepreneurs,
paying $1.7 billion in taxes and with a spending power of $4.5
billion.
Our current immigration and visa policies not only
discourage international tourists and business travelers, but
also hinder businesses from finding the workers on which their
industry relies. Most of my hourly workforce are immigrants. We
start them at 30% over the Illinois state minimum wage, and not
only retain most workers for many years, but also give them a
solid start to becoming powerful consumers in our local
economy.
Conclusion
Small business owners are the engine of our economy,
creating two-thirds of all new jobs. The role of Washington is
to help create the basic market conditions so that small
businesses like mine can thrive and compete on a level playing
field with our larger competitors. It's hard to envision a
future in which small businesses will continue to be the job
creators and innovators of America without the basic conditions
I've touched on here today. These include quality, affordable
health care, protective regulations, and federal policies that
support a strong middle class. We need Washington to maintain
and build on the gains of recent years, especially in health
care, in order to ensure that the small businesses like mine
can continue to flourish.
Thank you again for the opportunity to testify. I look
forward to your questions.
[all]