The Economy

Small-Business Optimism Falters

Taxes, government requirements, and poor sales are top concerns, according to a trade group.
Marielle SegarraApril 10, 2013

Small-business optimism is dwindling, according to a report released yesterday by the National Federation of Independent Business, a trade group. After three months of growth, last month’s Index of Small Business Optimism fell 1.3 points, to 89.5. The index components that declined most were labor market indicators, inventory investment plans and sales expectations.

Taxes were the number one concern for the 759 small-business respondents, who are all members of the NFIB. Twenty-three percent said taxes were the most important problem for their companies, compared to 20 percent a year ago. Other top concerns in the survey included government requirements and red tape, and poor sales.

President Obama’s 2014 budget proposal, released today, proposed several tax changes, including a one-time, temporary 10 percent tax credit for small businesses that hire new workers or boost wages. The plan would also permanently extend the 2013 section 179 expensing and investment limitations, which allow small businesses to write off up to $500,000 of new investments, such as off-the-shelf computer software.

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According to the NFIB survey, demand for credit among small businesses is also weak. Forty-nine percent of companies surveyed said they did not want a loan (that percentage jumps to 64 percent when respondents who did not answer the question are included). The president’s budget also proposed a Small Business Administration lending platform to simplify the loan process for lenders and borrowers.

In addition, only 4 percent of NFIB respondents said they considered now a good time to expand their businesses. The percent of owners planning capital outlays stayed the same as last month.

It was not all bad news, though. Job creation among small businesses is at its highest in a year, according to the survey. March was the fourth consecutive month of job growth, with companies increasing employment at an average of 0.19 workers per firm. That said, among 47 percent of respondents that hired or tried to hire in the last three months, 77 percent said they are having trouble filling openings.

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