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Regulations, taxes arenít killing small business, owners say


This news story was published on September 2, 2011.
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WASHINGTON ó Politicians and business groups often blame excessive regulation and fear of higher taxes for tepid hiring in the economy. However, little evidence of that emerged when McClatchy Newspapers canvassed a random sample of small-business owners across the nation. PHOto: Rip Daniels, a businessman in Gulfport, Mississippi, says government regulation is not hurting his radio and real estate business, rising insurance costs are. It’s a topic overlooked by politicians who claim taxes and regulation are choking job creation.|By Kevin G. Hall, McClatchy Newspapers

WASHINGTON ó Politicians and business groups often blame excessive regulation and fear of higher taxes for tepid hiring in the economy. However, little evidence of that emerged when McClatchy Newspapers canvassed a random sample of small-business owners across the nation.

“Government regulations are not ‘choking’ our business, the hospitality business,” Bernard Wolfson, the president of Hospitality Operations in Miami, told The Miami Herald. “In order to do business in today’s environment, government regulations are necessary and we must deal with them. The health and safety of our guests depend on regulations. It is the government regulations that help keep things in order.”

The U.S. Chamber of Commerce is among the most vocal critics of the Obama administration, blaming excessive regulation and the administration’s overhaul of health care laws for creating an environment of uncertainty that’s hampering job creation.

When it’s asked what specific regulations harm small businesses ó which account for about 65 percent of U.S. jobs ó the Chamber of Commerce points to health care, banking and national labor. Yet all these issues weigh much more heavily on big corporations than on small business.

“When you look at regulations in many respects, what a lot of people don’t take into account is their secondary impacts,” said Giovanni Coratolo, the vice president of small-business policy for the U.S. Chamber of Commerce.
“They pay the price, regardless of whether they are primarily the recipient of the regulation or they are secondarily getting the impact of it. They pay the price in higher costs, whether it is fuel or health care or whether it’s being able to find access to capital.”

McClatchy reached out to owners of small businesses, many of them mom-and-pop operations, to find out whether they indeed were being choked by regulation, whether uncertainty over taxes affected their hiring plans and whether the health care overhaul was helping or hurting their business.

Their response was surprising.

None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath.

Wolfson’s firm is readying to open a Hampton Inn this year in Miami on land purchased from a condo developer during the housing downturn. His business could be in line for higher taxes if President Barack Obama allows the current, lower rates on the richest Americans to expire in 2012 and return to previous levels.

That didn’t seem to bother Wolfson, who through his partnership declares profit and loss as a pass-through on his personal income taxes, as many small businesses do.

“Higher taxes are not good for business, but some of the loopholes and deductions should be looked at,” he said.
The answer from Rick Douglas ó the owner of Minit Maids, a cleaning service with 17 employees in Charlotte, N.C. ó was more blunt.

“I think the rich have to be taxed, sorry,” Douglas said. He added that he isn’t facing a sea of new regulations but that he does struggle with an old issue, workers’ compensation claims.

Douglas told The Charlotte Observer that he’s hired more workers this year, citing pent-up demand from customers.
“My theory is that the people that do have jobs are working harder and they have less time to clean. People were holding back for such a long time, and then they started spending a little more,” he said.

Then there’s Rip Daniels. He owns four businesses in Gulfport, Miss.: real estate ventures, a radio station and a boutique hotel/bistro. He said his problem wasn’t regulation.

“Absolutely, positively not. What is choking my business is insurance. What’s choking all business is insurance. You cannot go into business, any business ó small business or large business ó unless you can afford insurance,” he told Biloxi’s Sun Herald.

Since 2008, Daniels has opened one business and expanded another, hiring as many as 15 people thanks to lower labor costs and an abundance of overqualified job candidates. He credits the federal stimulus effort with helping to keep some smaller firms afloat.

“It allowed those folks to spend and have money and pay for the essentials,” said Daniels, whose business pays corporate taxes. He grudgingly supports closing some business tax deductions to reduce the federal budget deficit.
“Who wants to pay more? I certainly don’t. I want to pay my fair share, and I do,” Daniels said, adding that he wouldn’t resist loophole closures to cut deficits.

For Zajic Appliance in south Sacramento, California’s capital city, business also has picked up. The company hired two workers this year, bringing the total to 18, said Christopher Zajic, who manages the family business.

One odd reason for his improving business: sales of bank-owned properties in a city that’s among those hardest hit by the housing crash. When these houses sell, he said, their new owners generally replace appliances.

California used some of its federal stimulus money to pay for a “Cash for Appliances” program last year, a rebate program for purchases of energy-efficient washing machines and refrigerators.

“It spiked sales,” Zajic told The Sacramento Bee, adding that he thinks the effort simply compressed sales into a shorter time period rather than created new demand.|

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