Despite the churn of small business success stories in the mainstream media, the long-term prognosis for local independent businesses in the U.S. is not ideal. In a 2010 paper entitled “Out of Business,” Barry C. Lynn of the New America Foundation showed that the number of new entrepreneurs and business owners as a percentage of the working-age population declined by 53% between 1977 and 2010.According to business census data, the number of businesses in traditionally independent sectors has dropped dramatically over the last decade.Bakeries (-33.7%), florists (-25.9%), hobby shops (-23.6%), gift stores (-23.1%), book stores (-22.9%), garden centers (-14.8%) and furniture stores (-11.9%) have all seen double digit percentage decreases in the number of industry businesses since 2002.Given the growing number of vacant storefronts, its hard not to conclude that these publicized successes are the exception rather than the rule.
Independent businesses are the backbone of communities, demonstrating greater proficiency at sustaining local economies than those remitting profits and franchise fees to points elsewhere.Why, then, is it more difficult than ever to start and/or operate an independent business?The theories abound: mass purchasing power, tighter credit markets, various supply chain advantages, etc.But there is one additional theory to consider: that the consolidation of local retail and service industry businesses in the national economy increasingly mirrors the consolidation of the business “voice” in Washington, DC.As the advantages of operating a business increasingly tilt in favor of larger entities, perhaps the laws governing the field of play are changing in favor of larger businesses as well.
Last year, a handful of small trade groups started working together to educate federal policymakers about the benefits of supporting independent businesses in local communities.Focusing on two “bottom line” issues, the National Main Street Business Coalition advocates for better access to affordable capital and sensible tax reform policies that would better sustain locally owned, independent businesses. The most recent example of the group’s work is a letter, signed by 17 national and state trade associations in mid-April, asking Congress to consider the unique needs of independent businesses in rewriting the federal tax code.
Borrowing from ideas offered by bipartisan tax reform panels commissioned by President Bush (2005) and President Obama (2010), the group focused primarily on recommending the use of checkbook accounting — where the taxable income of a business would simply be receipts minus expenses.Imagine your bank statements as your “books.” This would reduce your cost of compliance by relying less on accountants to navigate through stacks of forms and complex code.Checkbook accounting would better position independent shop owners to reinvest profits back into their business without fearing the consequences of depreciating those investments over arbitrary periods of time. This is the type of federal policy that could actually stimulate local economies, empowering independent business owners to reduce overhead, improve profitability and grow.
The problem: independent businesses stand to benefit more from checkbook accounting than would larger corporations.The complexity of the tax system works to the benefit of businesses that can more easily utilize the laundry list of credits and deductions available to them for certain preferred operational behaviors. Given their shrinking number, there are fewer independent business owners to make a case for something like checkbook accounting than the last time Congress and the President rewrote the federal tax code in 1986.This does not make the concept of checkbook accounting any less doable or appealing.It only makes it more difficult for the idea to rise above the buzz of special interest clamoring.
If the idea of checkbook accounting sounds appealing, maybe you can find a moment or two to “lobby local,” spreading the word amongst fellow independent business owners throughout your local community.Perhaps a small group of interested parties could invite your Senators or Representative over for a cup of coffee to discuss what something like checkbook accounting could mean for your business’s bottom line.As effective as the National Main Street Business Coalition can be at presenting the independent perspective on a particular issue, the most effective advocate on federal policies that can benefit your independent business is you.
To read the full letter to the House Committee on Ways & Means, visit: http://waysandmeans.house.gov/uploadedfiles/society_of_american_florists_.pdf
To “Like” the National Main Street Business Coalition on Facebook, visit:
Corey Connors is Senior Director, Government Relations for the Society of American Florists.He can be reached via email at firstname.lastname@example.org