The coronavirus (COVID-19) outbreak has impacted every American institution. Some, like most American households, can go into hibernation and wait it out while we try to “flatten the curve.” However, one pillar of our economy that can’t just go on hiatus is small business.
Small businesses employ 47 percent of private sector workers in the U.S., meaning nearly 60 million individuals depend on them to support themselves and their families. These businesses range from your local, independent restaurant to the self-employed accountant. Unlike large corporations, these businesses typically are not flush with liquidity and a disruption or extended delay in cash flow will either force them to close or take on more debt through high-interest lenders.
While lawmakers have taken some immediate steps, we believe there is more that lawmakers can do to help businesses and workers weather the impact of COVID-19 on the economy.
Tax and debt deferral: The deferral of the April 15 deadline for federal tax returns should be expanded to include the subsequent two quarterly tax payment deadlines, which place a significant financial burden on the self-employed. The government also could negotiate deferred mortgage and credit card payments for self-employed micro-businesses, who often operate out of their homes and are funded with personal credit cards. We would recommend that governors delay sales tax remittance in support of small businesses.
Direct assistance: While the paid leave credit included in the most recent proposed coronavirus relief package will certainly help, it will not cover many of the costs they currently face, including lost business, paid sick leave, individual health care costs and fixed expenses. In addition to the direct payments under discussion for all Americans, Congress should create a supplementary direct assistance program for the self-employed and micro-businesses to help cover these costs.
Unemployment protection: The federal government should immediately fund an unemployment protection fund for the self-employed and gig workers, who are not eligible for unemployment protection. This would allow them to draw down benefits if faced with declining income.
Disaster relief: Many of the government’s disaster relief programs simply do not work for the self-employed and micro-business community. Congress should appropriate funds for a self-employment assistance fund within the Economic Development Administration’s Economic Adjustment Assistance and Small Business Administration’s (SBA) Disaster Relief Loan programs to support them.
Pass the SBA Business Stabilization Direct Loan Program Act of 2020: This legislation would create a new SBA program to directly deploy interest-free loans to small businesses impacted by COVID-19 for employee benefits, wages, pay taxes, rent and debt refinancing.
Earned Income Tax Credit (EITC): The EITC is an important source of income protection and works equally well for gig workers and those in a more traditional employment relationship. Congress should expand EITC by increasing the income threshold, including younger and childless workers, and eliminating the marriage penalty. Lawmakers also should allow the credit to be calculated and administered on a quarterly basis, which would better support individuals struggling to manage short-term income volatility.
Adopt long-term family and medical programs for owners, employees and caregivers:
The time is now for Congress to thoughtfully establish a national program providing partial wage replacement for small business employees (specifically businesses with fewer than 50 employees) and the self-employed to handle serious health conditions for themselves, family members, or loved ones they are caregiving for, including parental leave. Setting up a program that is inclusive of the self-employed and micro-business community will require true vision by members of both parties and both chambers, but not doing so will continue to harm American families and further ensure this population remains vulnerable to the ebbs and flows of financial uncertainty and global health pandemics.
A thriving small business community is the indicator of a strong economy and we know from history that it will be the small business community that ultimately will pull us out of any recession. Lawmakers have an opportunity to give them the tools they need to bounce back faster and make them more resilient.
Rhett Buttle is a former member at the White House Business Council, the founder of Public Private Strategies, and a senior fellow at The Aspen Institute. Follow him on Twitter @rhettbuttle.
Katie Vlietstra Wonnenberg is vice president of government relations and public affairs for the National Association for the Self Employed (NASE). Follow her on Twitter @GAatNASE.