As Democrats and Republicans in Congress met with their caucuses Monday in hopes of passing a compromise debt-reduction package to bring an end to the weeks-long debate, small business owners had one reason to cheer: tax increases have apparently been averted.
The deal allows for a $2.4 trillion increase in the debt limit, so long as lawmakers can cut that same amount or more in spending. If a committee, set up by the debt proposal, cannot come up with spending cuts, a "trigger" in the plan will enact cuts in the government's budget.
Larry Nannis, shareholder at Levine, Katz, Nannis + Solomon, P.C., a small business in Needham, Mass., said the entire debate was disappointing to watch.
"Partisanship has trumped good judgment—I don't know how else to say it," said Nannis, who is also chair of the National Small Business Association. "I think blame can be equally given to both sides of the aisle."
Although the compromise does not include tax hikes or new taxes being imposed on small business owners, Nannis said he is still wary of how the implementation of the deal will play out. Tax reform and automatic cuts that may be triggered if spending cuts cannot be found by lawmakers could potentially impact small business owners.
"Tax reform needs to be fair, and not on the backs of small businesses," he said. "When that happens, at the end of the day, we can gain some level of certainty that small business will once again be the backbone of this country. The biggest concern we have is corporate tax reform."
Ray Keating, chief economist for the Small Business & Entrepreneurship Council, said the winners of the lengthy debate are the House Republicans and Tea Party members because they got the debate framed the way they wanted it.
"They didn't just increase the debt ceiling as we have in the past—it is linked to what is actually going on on the spending side," Keating said. "The president and the majority in the Senate had to move away from their position that tax increases had to be a part of the deal. That is a huge win for small business owners."
But the win is temporary, Keating said, which is important for small business owners to keep in mind. However, for business owners operating in an increasingly uncertain climate, tax hikes are one less thing to lose sleep over, at least for now.
"The debate will be back, as it always is," he said. "Tax increases aren't a good idea in this economy, and this is a worry that can be removed."
Once the deal is signed into law, Keating said it will be clearer as to how big the spending cuts in Washington will actually be. SBE Council members are pleased to see some spending restraints put in place for the time being, he said.
Cynthia Magnuson, senior media manager at the National Federation of Independent Business, said the federation's members are also in support of the Balanced Budget Amendment which should be signed into law by the end of 2011.
"As small business owners, they know you don't spend more than you have," Magnuson said. "They are fed up with out of control spending in Washington, so they are pleased with the spending controls in the (deal)."
The fact that no new taxes have been put in place, and taxes are not being raised is extremely important to NFIB members, she said. Lingering uncertainty about the economy and health-care reform are among their main concerns once the dust settles.
"Small business owners always get hit with taxes—so we were concerned about that," Magnuson said. "They have been hurting in this economy for some time. There is still a great deal of uncertainty."
For the time being, Nannis has a more cynical take on the debt deal.
"Our feeling toward deficit reduction is that it’s most successful if everybody is equally unhappy," he said. "It's really more of keeping an eye on tax reform, and making sure everybody shares equally in the gain and the pain."