According to Reuters, the Obama administration wants Congress to enact or expand tax breaks for small businesses and remove barriers to start-ups, ideas he proposed over the last year that will be featured in his 2013 budget next month.
The proposal is expected to boost the economy and create jobs. The business owners in Boston reacted differently to the proposal. Chris Chan, manager of Noodle Street, said he would be delighted if the Congress passed the proposal.
“All of the stores on Commonwealth Avenue have been affected by the recession,” Chan said. “Business is not as good as before. It would be a relief if the proposal becomes real. But I think it’s too late for the economy.”
“The tax break might reduce the cost of small businesses by 1-2 percent and make them a little bit more competitive with big corporations,” said James Post, professor of Corporate Management in School of Management.
“However, giving a tax break to the small businesses is not going to revive the whole country’s economy,” Post said. “They make up only a little portion of the nation’s consumption.”
A POLITICAL PLOY?
The proposal might have more political implications due to the presidential campaign.
“Obama is putting up a plan that makes everybody happy,” said Jeffery Furman, assistant professor of Strategy & Policy at SMG. “Big corporations are few in number; small businesses outnumber them by almost 40 times in our country.”
“There is huge number of small businesses in every village, or town. Grocery stores, restaurants, dry cleaning – every community has a set of services. And that’s why the proposal affect most regions in the country,” Furman said.
“It’s common for politicians who want to get re-elected to throw out a proposal like that,” said David Weil, professor of Public Policy in SMG. “Bill Clinton did the same thing in 1997. George Bush did the same thing in 2004. They want to put a happy face on the economy and convince people that we are doing better.”
However, Weil does believe the proposal has the potential to create a lot of jobs.
“Sometimes people neglect how much effect small businesses make on creating jobs,” Weil said. “The tax rate for an additional dollar of the revenue determines whether the employer wants to hire more people.”
AN URGENT PLEDGE
In today’s crowded and competitive marketplace where all the local businesses are being replaced by corporate brand names, small businesses are looking for an outbreak. Colonial Drug, a small pharmacy in Harvard Square that has been owned by the same family since the 1940s, is one of them.
Cathy Boston, the owner of Colonial Drug, feels a tax cut would offer much-needed relief for small businesses.
“People don’t patronize local stores that much today. They buy stuff on Amazon or other companies’ websites. But online shopping couldn’t replace sniffing and trying perfume in a boutique store,” Boston said.
“I’m definitely happy that a proposal is being made to help the small businesses, especially in Harvard Square,” Boston said. “It’s crucial that we keep its character.”
However, local businesses are gradually losing their place in Harvard Square. As local stores being replaced by brand names like Ann Taylor and American Apparel, the small businesses are trembling.
“Our regular customers are usually more sophisticated and refined. They know what they want, instead of going with the flow,” Boston said. “But the younger generation is still the engine of consumption. There are two independent bookstores in Harvard Square that’s facing going out of business.The shop owners said if the younger people purchase only 20% of the amount of books they purchase on Amazon in their stores, they could survive.”
Boston said the tax cut might raise people’s awareness of how tax flows in the community.
“If you purchase locally, 70% of the tax stays in the community. If you purchase from corporates, the tax would flow to Wall Street,” Boston said.
“I hope the proposal could be implemented before it’s too late,” Boston said. “We’ve already lost so many stores in Harvard Square.”
Ella Calusen, a freshman in College of Communication said the tax cut is a good thing.
“I’m a big supporter of local and small businesses,” Calusen said. “Although I don’t think the plan can make a huge difference, it’s a nice idea.”
“The proposal is targeted to affect a certain amount of people. It makes sense that Obama is trying to appeal to the people during the election. I don’t think pulling out a public relation strategy is a sneaky move,” Calusen said.
While some view the tax cut as helpful financial relief, other small business owners remain skeptical.
“I’ve never been an Obama fan,” said Louie Fenerlis, owner of Louie’s barbershop. “I’ve been running this store since 1993. I go to work at 7 a.m. and get off at 6 p.m.; I know all of my customers by name. The government doesn’t run my store, I do.
“Even if the proposal is passed by Congress, the government can still get my money from other places. I’ve got four employees. What if he [Obama] raises the health insurance cost?”
Kevin Hom, a regular customer at the Louie’s for 19 years, said it’s unlikely that the tax break would bring the price down.
“The haircuts used to be $12 when I was a freshman. Now it’s $16. The heavy inflation is bringing the price up,” Hom said. “I don’t think the proposal is going to benefit small businesses too much because they have to worry about utilities, employee benefits, and so many other things. It’s a nice idea, but it’s too late.”