Bank One economist Peter Glassman says rising pricing power, favorable credit conditions and tax law changes have led to the highest level of optimism in the past 20 years among small-business owners.
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“Gains were widespread, with increases in optimism spanning from the overall economy to earnings and, most importantly, sales,” Glassman wrote in the inaugural issue of Bank One’s quarterly Small Business Review. The Bank One report uses data compiled by the National Federation of Independent Business.
Glassman said the combination of a big federal budget and election-year politics should translate into strong production gains by most firms. “Real GDP growth could easily exceed current forecasts,” he said.
Glassman said the data showed that demand for products and services is finally allowing small businesses to raise prices and boost hiring.
In addition, he said, low interest rates are making it easier for owners to borrow money, while federal tax laws are allowing them to take larger deductions.
“Not only were many businesses spurred to increase spending, but many more individuals likely decided to start their own business[es],” he said.
Illinois firms face rising tax burden
An analysis of increased business fees and taxes approved last year by the Illinois General Assembly shows the business share of state and local taxes has risen to 52.1 percent, nearly 10 points above the U.S. average, according to the Illinois State Chamber of Commerce and the Chicagoland Chamber of Commerce.
The analysis showed that in some cases, business taxes in Illinois are now 25 percent higher than in nearby states.
“Lawmakers who focus solely on the corporate income tax–which is less than 6 percent of all taxes employers pay to the State of Illinois–are doing a severe disservice to the state’s job providers,” said Douglas Whitley, CEO of the state chamber.
Whitley warned that the state’s continuing effort to shift the tax burden to business inevitably will “suppress investment and kill jobs.”
Last year, the state raised business taxes and fees by $600 million. This year, Gov. Rod Blagojevich has proposed raising an additional $400 million in new taxes from business.
Democrats decry SBA budget cut
The budget request for the U.S. Small Business Administration is “totally inadequate,” Democratic members of the House Small Business Committee said.
“The truth is this budget falls entirely too short and leaves our nation’s small businesses in dire need,” said Rep. Nydia Velazquez (D-N.Y.), ranking Democrat on the panel.
In its fiscal 2005 budget proposal, the Bush administration plans to cut the SBA’s budget 15 percent, letting a temporary $79 million subsidy for fees in the 7(a) program expire.