Tag Archives: American Jobs Act

Payroll Tax Cuts May Hinder Small Businesses More Than Help

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The Coney Island Boardwalk. Photo by Rachel Sapin

One way the President’s American Jobs Act aims to put people back to work is by cutting payroll taxes paid by businesses on their first $5 million in half, and by cutting payroll taxes for firms that increase their payroll by adding new workers.

CNN in New York and Crain’s in Detroit paint a rosy picture of how payroll holidays will prove a boon to small businesses.  Julio Gonzales, owner of Coney Cones in Coney Island disagrees with this picture. “Social Security is in trouble,” he said. “It’s under-funded, and so cutting that tax doesn’t make a lot of sense.” Coney Cones employs around 30 people seasonally and would supposedly benefit from the plan’s payroll holiday.

Although Gonzales may be underrepresented as a small business owner who is against payroll tax cuts, luckily for us, some media outlets have a similar viewpoint.

•  Destroying Social Security’s Only Funding Stream The Hill pointed out that the proposed payroll tax holiday is frustrating politicians on both sides, as it’s taking from “Social Security’s lone funding stream and eventually eroding senior benefits.” This is relevant to everyone as we will all be senior citizens at one point or another.

• A Plan for the gainfully employed, but what about everyone else?  The organization Social Security Works released a statement immediately following Obama’s jobs speech condoning the President for stimulating the economy at the expense of the nation’s aging, ill, and elderly.

• A bipartisan effort to rob the blind  L.A. Times writer Michael Hiltzik wrote a compelling piece arguing that the tax cuts were “targeted inefficiently and unfairly, skewing to the upper middle class and hurting lower-income families in comparison with the Making Work Pay tax credit it replaced.”

To Obama’s credit, Robert Reich, former labor secretary under Bill Clinton cheered the President’s ability to present a joint session to Congress, and also the President’s ability to clearly explain the jobs issue to the public.

Small Business Solutions in NYC’s Five Boroughs

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One of the pillars of the President’s American Jobs Act is providing relief to small businesses. By boosting them, Obama believes that the economy will follow, and according to the U.S. Small Business Administration there might be some truth to this – small firms created 65 percent of net new jobs in the last 17 years.

This graph, categorized by firm size, depicts private-sector net job creation from 1993 - 2009. Courtesy of the Small Business Administration Office of Advocacy.

Other experts argue, however, that helping small businesses isn’t a quick fix. As the Fiscal Times explains, most of them close just as quickly as they open.

Regardless of which side wins the small business debate, New Yorkers aren’t wasting time to see if Obama’s plan works, or even passes. Instead, small business owners in each of New York City’s five boroughs are creatively taking matters into their own hands:

  • Bronx: Plagued with the highest unemployment rate of NYC’s five boroughs, locals are reverting to good old-fashioned brainstorming for answers. On September 13, New York State Senator Jeffrey Klein launched ThoughtRaisers, a forum for small business owners and elected officials to discuss problems and generate solutions.
  • Brooklyn: To improve their workforce, four small businesses agreed to match funds doled out by Mayor Bloomberg. Believing that small businesses are critical to economic recovery, the Mayor is providing funds to train and educate the small business employees.
  •  Manhattan: When Starbucks threatened to close out an independent coffee house, one small business resorted to the cheapest survival tactic possible: word of mouth. When The Bean was forced from their storefront to make way for the mega-chain, outraged customers spread the word. Now, the business plans to relocate just down the street and is confident that its loyal clientele will follow.
  • Queens: Frustrated with the economic situation, the traditionally democratic ninth district in Brooklyn and Queens voted in Republic Bob Turner, a move that some see as an indicator of America’s frustration with Obama’s economic policies.
  • Staten Island: Choosing not to rely on anyone else, small businesses in this borough decided to ban together in an attempt to help one another. On the same night as Obama’s jobs speech, locals launched the 3/50 campaign, an initiative encouraging shoppers to patronize the three business that they would miss most if they were forced to close.

Each of the five locations mapped out below:

View Businesses in a larger map

Will Obama’s Jobs Act Help?

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Obama Delivers Jobs Act Speech

Credit: whitehouse.gov

Last week, President Barack Obama called on Congress to pass The American Jobs Act. The act’s proposals run the gamut from tax breaks to stimulus spending, and policy experts’ reactions to the bill ran the gamut too.  But it’s still unclear whether the bill will actually help Americans, and New Yorkers in particular, get jobs.  So let’s parse through the three best arguments for and against the bill.

Positive Reviews:

1. One of the most fervent supporters of the act is New York City Comptroller John Liu.  For every $1 billion invested in New York City, Liu’s office estimates that 7,500 jobs would be created. Obama’s plan would funnel approximately $3 billion to New York State, but it’s not known how much of that would go to the five boroughs.

2. Obama’s proposal would give New York State about $2 billion to retain teacher and first responder jobs, and another $2 billion to modernize public schools in the state.  New York State United Teachers, which represents 600,000 educators in New York, sided with the president because of that funding.

3. While America seems to be growing less fond of Obama in general, 45 percent of people surveyed by Gallup responded that they’d want their member of congress to vote for the act, compared with 32 percent that would vote against.

Negative Reviews:

1. James Parrott, the chief economist at the Fiscal Policy Institute says the jobs act is too heavy on tax cuts (toward bottom of article).  He says federal spending creates many more jobs per dollar than tax cuts do.

2. Business groups are saying the payroll tax cuts might seem business-friendly, but in reality can’t help in the long-term because businesses are struggling too much to hire new workers.

3. The president of the same teachers union that supports the bill (NYSUT) thinks it might be used as an excuse to not fund New York schools on a state-level.

Unless Obama finds a way to convince a vocally opposed Republican party otherwise, all the praise and criticism of the bill might be moot.