Today, the U.S. House of Representatives passed “jobs legislation” that could be devastating for the nation’s small businesses.  H.R. 5297, the Small Business Jobs Act contains a loophole that may allow large businesses to fraudulently masquerade as small businesses without fear of prosecution.

I strongly believe that the net effect of this bill will be harmful to job growth, and the potential for harm greatly outweighs any potential for benefit.  The American Small Business League (ASBL) and I are concerned about the following:

1. The tax provisions of H.R. 5297 are not likely to create jobs. Research by the Economic Policy Institute, and Princeton University's Center for Economic Policy Studies indicates that tax cuts do not effectively create jobs or stimulate the economy.  The tax cuts are so narrowly focused that they are unlikely to provide a significant benefit to most small businesses.  A more effective way would be to give any firm with less than 100 employees a 5 percent cut in their federal taxes.  (http://www.huffingtonpost.com/2010/07/28/bush-tax-cuts-extending_n_662743.html;http://www.epi.org/analysis_and_opinion/entry/tax_cuts_wont_create_jobs/) 

 
2. The lending provisions of H.R. 5297 are not likely to create jobs.  Recently, the Congressional Oversight Panel, and the National Federation of Independent Businesses (NFIB) released highly critical reports regarding the Obama Administration’s efforts to further bolster community bank lending to small businesses. Both reports indicated that small businesses across the country are in need of business opportunities and increased demand for their products and services as opposed to increased access to capital.   (http://www.nfib.com/Portals/0/PDF/sbet/SBET201006.pdf; http://www.huffingtonpost.com/2010/05/13/federal-oversight-panel-s_n_574781.html)

3. Language in H.R 5297 gives the SBA the ability to change size standards for small businesses.   This language will almost certainly lead to an increase in the volume of contracts that are awarded to large businesses, and a decrease in the volume of federal contracts awarded to small businesses.  New York venture capitalist Karen Mills is almost certain to change size standards in such a way that it will divert federal small business contracts to firms owned and controlled by some of the nation’s wealthiest venture capitalists.

4. H.R. 5297 contains an exemption from capital gains tax on investment in small businesses.  This language was unquestionably a political payback to the venture capitalists that backed President Obama’s run for the White House.

5. The bill fails to stop the diversion of federal small business contracts to corporate giants.  The most straight forward, cost effective, efficient, and deficit neutral way to create jobs and stimulate the national economy is to stop the diversion of more than $100 billion a year in federal small business contracts to corporate giants and redirect those funds to small businesses.

“Anyone that knows anything about me, knows that I am a small business advocate through-and-through.  I hate this bill, and I think it is going to hurt small businesses,” ASBL President Lloyd Chapman said. “ I know that the Small Business Administration (SBA) is going to abuse the language in this bill to divert government small business contracts to large corporations and firms owned by venture capitalists.  I am 100 percent sure that it is going to hurt small businesses.”

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