Should Small-Business Owners Get a New Tax Break?

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You may have noticed the economy is still sucking wind. Unemployment has stayed stubbornly high, and May saw the least job growth of any month in the past eight. There are worries that the fragile recovery may be slowing down again, with some observers beginning to discuss the possibility that we could be headed down again, into a dreaded double-dip recession.

As a result, there may be new help on the way for small-business owners, as the Obama administration works to keep the recovery from heading back into a nosedive. Word is several proposals are being discussed. It's still an open question whether any will come to pass -- and if they did, if federal tax breaks would do the trick.

One proposed plan to stimulate hiring that's making the rounds is a cut in payroll taxes. A primary advantage of this idea is that it has a chance of actually becoming law, as pro-business Republican lawmakers have said they're in favor of this type of maneuver right now.

It's another question whether a payroll-tax reduction would really lead to more hiring. Breaks small businesses received earlier in the downturn for hiring don't seem to have created a job boom.

There is an obstacle to this type of tax relief winning approval: The growing feeling that small business are perhaps not the prime engine of the economic recovery they've been billed as during these lean years. Rates of small-business creation have been contracting since the 1980s, a study by The Kauffman Foundation recently found. One theory: The financial-sector boom sucked up talent that might otherwise have started new enterprises.

Existing small businesses have been cash-strapped and hard-pressed to add staff, even if they see market opportunity. Which begs the question of whether some other form of assistance might be better for helping small businesses grow -- maybe another loan-stimulus package, or more funding for mentoring through SBA. 

Some have pointed to the persistent real-estate price slump as a major culprit in the economy's ongoing doldrums. Taking steps to resolve the backlog of foreclosed properties that need to be liquidated might get the whole positive cycle going again -- people buy homes, pay for goods and services to fix them up, and then borrow out and spend the equity they create. Businesses benefit at many points in that cycle.

What, if any, federal assistance would help your business hire? Leave a comment and share your ideas.

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