De-Coding Candidate Rhetoric: Tip Sheet for Straight Answers

This election year more than ever, it seems we are getting less information from the candidates regarding their detailed stand on critical economic issues. Iraq and the latest scandal du jour are hot issues, of course. Economic security, however, certainly continues to be a priority concern for voters.

When it comes to small businesses, every candidate is for helping us succeed. C’mon, we’re apple pie! We’re Main Street! The place where parades happen, and candidates march and wave while their volunteers slather our children and dogs with campaign stickers. Of course the government should treat us fairly, or so the candidates say.

Well, rhetoric and images do not cut it with small business voters. We want answers, then results when these people get elected to office. How will the candidates address important issues like taxes, health care, access to capital, regulation, U.S. competitiveness and the like?

To help small business owners and entrepreneurs decode the campaign talk I tapped into the expertise of Thomas M. Sullivan, chief counsel for advocacy at the Small Business Administration. Sullivan’s job is to be an independent advocate for small business in the government. By all accounts, he has done very well — always listening to the concerns of the small business community, and often taking positions counter to that of the political establishment in the federal government.

(Click here to read about Sullivan and the SBA's Office of Advocacy)

Here is my interview with Sullivan on how entrepreneurs can help draw out the candidates' agendas for key small business issues:

On Health Care Reform:

Kerrigan: In campaign materials, particularly on Web sites, I have read a lot about “access” and “fairness,” and government playing some type of role in helping to reduce or contain health insurance costs. What should small business owners ask candidates with regards to this seemingly complex issue? Any tips for helping entrepreneurs determine who’s got the right approach for lowering their health insurance costs?

Sullivan: Voters should be careful about assuming that a candidate is supportive of small business just because they have a firm grasp of the statistics. The policies and positions candidates draw from those statistics are what really matter. First, my advice is to be wary of any candidate who does not mention health care as a top issue for small business that needs to be addressed by Congress. My experience, hearing from small businesses in cities and towns throughout the United States, has been that access to health care remains the top small business issue.

The phrase, “access to health care,” and the term, “fairness,” are translated by the small business community as, “affordability.” Small business owners want to provide health care for their employees, but many cannot because of rising insurance premiums. Small businesses should ask candidates how they will make small group health plans more affordable.

Voters should question candidates who support new government programs to run a health insurance system for small businesses by asking who will pay for the program (translation, “will tax rates rise to pay for the government system?”). Voters should ask candidates how a large government bureaucracy would control health care costs.

Small Business Health Plan (Association Health Plans) legislation has been pending in Congress for several years. The focus of small business health plan legislation is to allow small businesses, working through their membership organizations, associations, and trade groups, to band together across state lines for greater purchasing power. My office commissioned a study in 2003 by Actuarial Research Corporation that documented the cost-savings for small business achievable through Association Health Plans because of lower administrative costs. Other legislation would allow small businesses to purchase insurance from out of state plans. This approach would create greater competition in the small group plan market. Candidates should be asked whether they support legislation that would enable more small employers to offer health insurance.

The Medicare Law enacted in 2003 provided employees with access to high-deductible health plans called Health Savings Accounts (HSAs) through their employers. Several states are considering tax incentives that mirror the federal tax advantages of HSAs to encourage greater usage of the accounts. Nationally, Congress may consider raising the limit for tax-free annual contributions to the savings plans. Candidates should be asked how they will provide more state and national incentives for employers to offer HSAs.

On Taxes:

Kerrigan: Next, let’s talk taxes – unfortunately, we must. It’s a critical issue for entrepreneurs. I have noticed several strategies by candidates in this election cycle. For those who don’t want to be pinned down as someone who will “raise your taxes,” there’s general avoidance or downright vagueness. For example, regarding current tax measures that will soon expire – like personal income and capital gains taxes, or small business expensing — some candidate’s profess an “open mind” because, after all, we “need the revenue.” Others are picking and choosing which tax relief items they will keep and what income levels are deserving of such permanent relief.

When it comes to small business owners and taxes, the issue is generally pretty cut and dry – either you are for lowering them, or jacking them up. What should small business owners be asking the candidates, specifically? And, what answer should they expect to get back?

Sullivan: When it comes to taxes, the small business community consistently calls for lower rates and greater certainty. Most small businesses are sole proprietorships, sub-chapter S corporations, or limited partnerships, and they pay taxes at the individual income tax rate. So, lowering the tax rates is a tax cut for small businesses.

In this subject area it is fairly easy to spot candidates who are true small business supporters. Those candidates approach tax policy with an understanding that a small business owner will re-invest savings realized by tax cuts or lower tax rates. Those candidates also understand that all the tax phase ins and phase outs, estate tax scenarios, sunsetting and expiring tax credits, and one and two-year tax provisions make it impossible for the long term planning necessary to grow a small business.

Small business voters deserve to be cautious of campaigns that characterize lower tax rates and higher expensing limits realized by the 2003 tax cuts as benefiting only mansion-dwelling multi-millionaires. Not only is that misleading because those who earned less than $50,000 in 2003 realized a 47 percent reduction in their taxes, but also it creates the impression that the tax cuts were bad for entrepreneurs and the economy at large. Nothing could be further from the truth.

Right now, the unemployment rate of 4.6 percent is lower than the average of the 60’s, 70’s, 80’s, and 1990’s. Small businesses deserve credit for hiring 60-80 percent of net new jobs, which has contributed to 3.2 million new jobs since December 2004. This country has worked itself out of a recession by creating jobs, realizing unprecedented levels of production output, interest rates are low, and the stock market is doing well. The credit goes to small business for re-investing tax savings, hiring employees, growing, and having the optimism and entrepreneurial spirit to work our way into an economic recovery.

If a state is experiencing a surplus in revenues, small business owners should ask what a candidate proposes to do with the money. Small business owners should support the candidate whose answer is, “… it is your money to begin with, so if we have a surplus we should give it back to you…” That, loosely translated, is a “tax cut.”

On Regulation:

Kerrigan: Regulation gets debated in such general terms during elections. Everyone, of course, is for lessening the regulatory burden on small business. So, let’s get specific.

What about Sarbanes-Oxley? How do small businesses know if candidates have a clue as to its impact, and if they did what would they be saying? What about IRS rules and complexity, and a candidate’s overall regulatory approach?

Sullivan: Regulations certainly hit small business the hardest. Research by my office documents that the smallest businesses bear a 45 percent greater regulatory burden than their larger business counterparts. One way to find out how well a candidate understands this is to ask about how the Sarbanes-Oxley law impacts small business. A candidate who truly understands small business would articulate how the Sarbanes-Oxley law was never intended to curb small firms’ access to capital. And, the pro-small-business candidate will explain how the law should be amended to exempt small firms from the most draconian auditing and reporting requirements of Sarbanes-Oxley. Small business voters should be wary of answers that focus on creating new government programs or a more complicated bureaucracy to address the cost of compliance with Sarbanes-Oxley rules.

I.R.S. may be the three letters small business owners loathe most. However, that has not stopped entrepreneurs from advocating constructive ways for their relationships with the tax enforcement agency to improve. The bottom line is complexity. The annual cost of over $1,300 per employee by the smallest firms to comply with the tax code is 67 percent higher than costs shouldered by their larger competitors. And, that figure only represents the cost of translating the rules, not what they actually owe in taxes. Small business voters want to know how candidates will simplify the tax code and how that can be achieved without shifting the tax burden to high-growth entrepreneurs.

(end of interview)

There’s one additional question small business owners may want to consider asking when a candidate says the government is spending way too much. Indeed, if there’s one issue almost all voters agree with, it’s waste and overspending in government. Simple question: What specifically would they cut?

Now, small business voters, go get those answers!

Do you have a tip for fellow entrepreneurs on decoding candidate rhetoric on key issues? Send them to me at and I’ll share them with readers in the next Small Business Beltway Report.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council, a research and advocacy group based in Washington, D.C. that works to protect small business and promote entrepreneurship. She is also founder of Women Entrepreneurs, Inc., an association helping women business owners succeed through education, networking and advocacy. Kerrigan can be reached at