Health care, taxes top issues for small business

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By Joyce M. Rosenberg
Associated Press

New York — Dan Danner never expected to end up in the middle of the health care debate. Or, for that matter, in politics.

As president of the National Federation of Independent Business, the biggest advocacy group representing small business owners in the U.S., Danner helped oversee the organization’s attempt to overturn the health care overhaul. Last month, the NFIB’s lawyers were among those arguing against the law before the Supreme Court.

The NFIB, which has lobbied for small businesses since its founding in 1943, contends that the law will harm small businesses by driving up their health insurance costs. It argued that a provision that requires individuals to buy health insurance is unconstitutional. Both sides in the debate are waiting to see whether the Supreme Court strikes down the individual mandate, the entire law, or allows the law as a whole to stand.

Danner is on the forefront of other issues that affect the NFIB’s 350,000 members, many of whom have companies with just a handful of employees. He leads the NFIB’s lobbying on concerns such as taxes and regulation. The group is among many business advocates calling for lower tax rates for small business owners whose companies are sole proprietorships, partnerships and what are called S corporations. The profits from these companies aren’t taxed — they’re “passed through” to their owners, who are then taxed as individuals. Often, their tax rates are higher than those for companies such as General Motors Corp. and Apple Inc.

Many tax rates, including individual rates, are scheduled to go up at the end of the year, unless Congress acts before then. Individuals could pay as much as 39.5 percent.

Danner joined the NFIB in 1993 after lobbying for steel maker Armco Inc. and holding positions in the Department of Commerce and the Reagan White House. Politics wasn’t his first choice.

“I was torn in college between acting and being an engineer,” Danner said. “I pretty quickly figured out I wasn’t good enough at either one. I figured out I better find another career, and somehow, I stumbled into politics.”

Danner spoke about the NFIB’s agenda. Here are excerpts from the interview, edited for clarity and brevity:

Q. What do you expect to happen after the Supreme Court rules on health care?

A. It’s easier if the whole law falls, because then, essentially, you have a clean slate and we’re back in overall healthcare reform, ground zero, to start over. We intend to be very involved in this debate as we have been for a couple of decades.

If just the individual mandate falls, I think it’s a little more up in the air.

Q. Let’s say the entire law is struck down. One idea that the NFIB has supported to help lower health care costs would allow small businesses to band together to form groups to buy insurance more cheaply. Do you still support that?

A. (Yes), across state lines or on a national basis. Right now, large companies have the ability to offer one insurance product in multiple states. They have protection under ERISA (the Employee Retirement Income Security Act) and the Labor Department, and they’re not subject to the individual laws in each state. If you’re GM and you have plants in 25 states, you can offer one set of products in all 25 that meets the best needs of your employees. In our similar approach that we’ve tried to get for several decades, bunches of small businesses would be able to buy health care like General Electric or GM and offer one set of products in multiple states and have the same purchasing power and clout when they negotiate with insurance companies.

Q. What’s on the agenda after health care?

A. The next big one is clearly the enormous tax bomb that’s set to go off at the end of the year if nothing happens. This is a big one, not just expiring provisions, but the overall impact of tax uncertainty. As a business owner, I don’t know what my tax is going to be.

Q. What are the provisions that affect business owners?

A. The top tax rate would go from 35 percent to 39.5 percent. The estate tax would go from 35 percent and a $5 million exemption to 55 percent and a $1 million exemption. Both the capital gains and dividends taxes would go up from the current 15 percent on both — capital gains goes up to 20 percent and dividends go to your individual tax rate. If you’re at 39.5 percent, the dividend tax goes to 39.5 percent. … There seems to be lots of support for lowering the corporate tax rate in some places, not much about lowering the rate on smaller pass-through companies.

Q. Do you hear from your members that they’re holding back on expansion because they don’t know what their taxes will be like?

A. Absolutely. … I think all of this uncertainty does have a significant impact on investment in your business. The harder it is to predict what the return on your investment is going to be, the less inclined you are to invest. It’s very different for small business owners because it’s their money, it’s not stockholders money. It’s their money and therefore, the question might be, do I invest in my business, or do I buy the car? Do I invest in my business or put that money into Sally’s college fund? These are real gut-wrenching decisions and the more uncertainty you toss in the middle of it, even the most rabid entrepreneurs take a step back and say, golly, I just don’t know.

Q. What’s your sense of the climate for small business lending? Is it easier for small companies to borrow than it was a year ago or two years ago?

A. By and large, it’s not particularly easier, but for our members, it’s not a problem for a great deal of them. Most of them right now don’t want a loan. They don’t want to expand, they don’t want to grow. They’re sitting on the sidelines, hoping for a little more certainty going forward.

Q. Do most business owners know which government regulations they must comply with?

A. It’s a big problem. Just an example of something we’ve been involved with for years is the IRS. A lot of small businesses use independent contractors to do whatever they need on a part-time basis. Let’s say as a construction company, I build a house every other month. I need people for a short little spurt to put a roof on, and then I don’t need them. The regulations on independent contractors were something like 200 to 300 pages. There’s no small business owner that’s going to sit down and try and understand a couple hundred pages of IRS stuff. That’s just way too complicated.

The tax ones usually are the most complicated when it comes to small businesses, but with others, the Occupational Safety and Health Administration and Labor Department, there’s a lot of complicated rules about a work site — what you can do, what you can’t do. You have to document, you have to have logs, you have to keep track of everything or everybody that’s on or off your worksite. They try to keep up with regulations, but they don’t always know.