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Arslan: Congress Can Rev Up Engine of Economy

Conventional wisdom used to hold that what’s good for General Motors is good for the country. While an American automaker may no longer be the face of our economy, our economic and employment policy often blindly assumes that large employers are the primary drivers of growth.

In fact, large employers don’t even represent 1 percent of the nation’s businesses, and they grow at a much slower rate than the real engine of our economy — small businesses. More than 77 percent of small businesses are entrepreneurial enterprises run by an individual who is by definition self-employed. While this business demographic is incredibly diverse, including businesses run from home offices, work trucks and storefronts, the self-employed as a whole would benefit from policy remedies that have been slow to gain momentum in the 111th Congress.

After spending a few weeks back home, Members of Congress should have a firsthand sense of the pall looming over Main Street America. Economic reports and employment data may help characterize business conditions, but it’s at dinner tables across America where small-business owners are having to chose between basic family needs and their businesses’ needs in the current economy.

Congress is in a position to deliver real relief to a segment of our economy that can help reverse recent dismal economic trends and begin to deliver meaningful growth, both in terms of revenue and employment. The self-employed are counting on lawmakers to deliver on a critical piece of legislation: the Small Business Jobs Act.

For small businesses, relief cannot come soon enough. These businesses need help to survive the lingering economic recession and to begin to thrive in an economic recovery.

With the rising cost of health care, the self-employed must be allowed to take a one-year business deduction for their health care costs. Currently, sole proprietors are unable to deduct their health insurance costs as a business expense, meaning they pay more in payroll taxes than any other type of business. While a one-year reprieve on an inequity in the tax code may seem like lip service, it is an important first step in leveling the playing field.

Another priority is giving self-employed business owners the option to take a standard home office deduction. Since more than half of small businesses are run out the home, this deduction is an important tax benefit for a huge number of small businesses. Unfortunately, taking this benefit is so complex and requires such a significant amount of paperwork that most qualifying business owners forgo the relief to which they are entitled.

While failing to meaningfully lower health costs for small businesses, the recent health care reform measure also created a monstrous paperwork burden for the self-employed. While ostensibly an expansion of an existing reporting requirement, the new law requires every business to issue a Form 1099 to vendors that it pays more than $600 during a tax year for goods and services. A typical self-employed business that issues two or three Form 1099s a year would now be facing two dozen or more, largely for basic business expenses such as hotel stays, high-speed Internet service and inventory.

Businesses need capital to grow. Small businesses would benefit if small banks, credit unions and other small lenders get an infusion of capital to make loans to those who need it. A $30 billion lending fund would help the self-employed who have been forced by the credit freeze to dip into their families’ savings or rely on personal credit cards to keep their businesses afloat.

After Senate passage last week, the Small Business Jobs Act returns to the House for its approval. The House must act quickly and decisively to ensure America’s small-business community gets the relief it so desperately needs.

As Congress resumes its work, it is critical that it specifically addresses the concerns of America’s self-employed and micro-businesses. They are and will continue to be the engine of the economy. Instead of more for Wall Street, now is the time for Main Street to put our economy back in the fast lane.

Kristie Arslan is the executive director of the legislative offices of the National Association for the Self-Employed, which represents 23 million self-employed and micro-businesses.

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