How Congress Can Boost Small Business in 2014

Advocates want simpler taxes, less health regulation and more mentoring funds.

Business advocates are hoping the proposed budget deal will provide funding and stability to small businesses in 2014.

If your New Year's resolution is to open a cupcake shop or create a mobile application to share cupcake recipes, small business advocates say Congress has work to do to make that process easier.

Lawmakers stirred a great deal of uncertainty for entrepreneurs this fall when the government shut down because of an inability to agree on the federal budget. The recent bipartisan budget compromise in Congress to prevent another shutdown in 2014, in addition to the generally stable economic recovery, gives small businesses more confidence heading into the new year, says Molly Brogan Day, spokeswoman for the National Small Business Association.

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Provisions in the proposed budget deal include rolling back automatic spending cuts, known as sequestration, which will give agencies more leeway in their contracting and will make it easier for some small businesses to do business with the government, Day says.

"Only 10 percent of small businesses are affected by federal contracts, but sequestration makes it harder for small businesses to compete with large firms," Day explains.

A stable budget plan also can give entrepreneurs more certainty on whether there will be enough funding for small business mentoring and support programs from the U.S. Small Business Administration, which are in high demand. Since 2009, more than 2.5 million people took training courses available from the SBA, including courses on how to write a business plan and how to navigate the federal contracting landscape, SBA spokesman Terrence Sutherland says.

"While we don't comment specifically on pending legislation, funding is critical to fully support ... counseling and training missions," Sutherland says. "The demand for these services is high and requested funding allows the resources to support and meet that demand."

The proposed 2014 budget includes $7 million for the SBA's Boots to Business program, which is designed to expose the more than 250,000 service members returning each year to the opportunities of small business ownership and entrepreneurship.

As Congress reviews how to maintain funding for small business education, it also should consider how to simplify taxes -- so businesses can plan ahead on spending -- and maintain a significant tax credit for small businesses, Day says. A tax credit known as "Section 179" offers businesses a $500,000 tax deduction on equipment purchases, but that tax deduction eligibility drops to $25,000 on Jan. 1, Day says.

"Congress would have to extend it again," Day says. "For a small business owner looking to purchase equipment, including computers or cars, it can make a huge difference."

A lack of clarity on tax policy makes it even more difficult to plan the growth of a tech startup, which often have plans for faster growth than a small business but fewer plans for immediate profit, says Jeff Reid, an adjunct professor of entrepreneurship at Georgetown University's McDonough School of Business. To encourage tech startups, Congress should ensure tax deductions for individual "angel investors" who commit funding to entrepreneurs, Reid says.

"When it comes to targeted tax credits there are very few that are more impactful than credits for an early stage investment," Reid explains.

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Startups could benefit from a simpler tax code, but the process of seeking business with the federal government also can be prohibitively complicated for tech startups because of long wait times, Reid explains.

House Small Business Committee Chairman Sam Graves, R-Mo., told US News & World Report that he is seeking ways to simplify the contract procurement process to encourage innovation by tech startups.

"I think there is a huge opportunity when it comes to agencies and startups," Graves says. "I think startups in many cases, and a lot of small businesses overall, can do it more efficiently and cheaper."

As 2014 approaches, businesses will continue lobbying Congress on labor-related issues such as immigration policy, which the tech industry claims needs change to attract more tech entrepreneurs to the U.S..