BizBox on Slate: Small businesses are the backbone of our economy. Sen. John Kerry, Chair for the U.S. Senate Committee on Small Business and Entrepreneurship, was live online with BizBox on Wednesday, Nov.14 from 4:00 - 5.00p.m. ET to answer your questions on small business. Discover what the Senate and the members of the Committee are doing to promote and protect small businesses in the U.S. Issues like affordable health care; tax incentives to encourage investments in small businesses; the SBA Disaster Loan Program and entrepreneurial development all affect small business.

John Kerry: Thank you for inviting me here today. I’m looking forward to hearing what’s on the minds of America’s entrepreneurs and letting you know what we’re working on in the Senate to help small businesses. Let’s get started.

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Linville, N.C.: How do taxes such as inheritance taxes, capital gains, and income tax help small business? Would raising these taxes stunt small business growth?

John Kerry: Taxes often come up when I'm talking to small business owners. You know, raising the capital gains rate and the top marginal income tax rate would have little impact on the majority of small businesses. Only 0.6 percent of households with small business income have income that exceeds $1 million. And 74 percent of households with small business income have income less than $100,000.

The estate tax needs to be reformed in a fiscally responsible manner which provides taxpayers certainty. It can be done in a manner in which most small businesses would be exempted. Only eight-tenths of one percent of deaths in 2004 were impacted by the estate tax. I also support targeted tax relief which fosters small business growth, including tax incentives for investments in small businesses – like increasing the exclusion for small business stock from 50 to 75 percent.

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Boston, Mass.: Senator Kerry,

How do feel about a flat tax and/or VAT taxes as a means to spur small business job creation?

John Kerry: Thanks for another tax question, Boston. I believe that our current tax system is on a collision course and needs to be simplified. Any tax reform should encourage small business job creation. I am in the processing of reviewing our tax system and looking at possible reforms. The goals of tax reform should be simplification and fairness.

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Philadelphia, Pa.: Do small businesses have flexibility or negotiating power when it comes to health coverage? I had cancer at 31, and my work insurance wouldn't touch any of it. Could my boss have done anything to help me? Is there any political buzz for a program to help small companies get better insurance plans for their employees? Thanks! (PS I'm fine now)

John Kerry: Philly, first of all, I’m glad you’re doing fine. I’m also a cancer survivor, so I understand where you’re coming from. I’m sorry to hear that your work’s insurance didn’t cover you. Unfortunately, the skyrocketing cost of health care is preventing more and more small businesses from offering health care for their employees.
I know several folks had health care related questions. We are working in the Senate to help more small businesses offer affordable, quality health care and ensure workers aren’t left in the cold when facing cancer or other diseases just when they need help most.

For example, I’ve introduced several proposals – including a 50 percent refundable tax credit for small businesses that provide health care to their employees. I’ve introduced a bill to have the federal government share in the cost of the most expensive, catastrophic cases that will help reduce premiums by up to 10 percent. I held a hearing in the Small Business Committee earlier this year and just last month, the Finance Committee held one focused on small business health care. Senator Snowe and I outlined the core principles we think the Finance Committee needs to follow for any tax-based health care small business legislation. We want to see employer-based tax credits, pooling mechanisms that empower small employers, more choices for health care options through competition, and expanded opportunities for sole-proprietors to purchase health coverage.

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Orlando. Fla.: One day I want to open my own bakery, but am afraid that I may go out of business while trying. Is there anyone out there that would be able to help me with that? Thanks!

John Kerry: Thanks for the question, Orlando, and to all the other budding entrepreneurs with similar questions about how to get started and how to get help once you’re underway.

You know, I started a baked goods business in Boston’s historic Faneuil Hall marketplace many years ago. Chocolate chip cookies have always been a weakness of mine, and one night a buddy and I decided selling cookies was exactly what we needed to do. It was tough, and we had no idea where to start. But we pushed through and although I'm no longer the owner, I’m proud to say the business is still there today.
I didn’t know it at the time, but there are resources out there to help entrepreneurs like you get started and navigate the web of permits and planning to make sure your business will be a success. I suggest contacting your local Small Business Development Center or Women’s Business Center (they help men, too) to learn what trainings and other assistance they have available.

I hear many success stories from small business owners who have used these resources so I know they work. Good luck with the bakery. And next time I’m in Orlando, I’ll swing by for some chocolate chip cookies.

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Burlington, Mass.: We are a small business (8A) performing IT services for several different government agencies. We are constantly being pressured to perform work beyond the scope of the stated contract. In each instance we have been threatened with contract termination if we do not comply. How should Small Businesses counter these pressure tactics from underhanded government managers? What recourse do Small Businesses have when threaten?

John Kerry: Burlington, this behavior by a government agency is simply unacceptable. Please contact my Boston office at 617-565-8519 or Small Business office at 202-224-5175 so I can get to the bottom of this.

I hear regularly from small businesses being treated unfairly in the contracting process – from not getting paid for the work they’ve done to not getting to do the work. Unfortunately, many small businesses fear being “blacklisted” if they complain. Our Committee has passed a bill that will restore integrity to the contracting process and provide opportunities to small firms to challenge these unfair practices.

We also call on the SBA to work with all government agencies to better train government contracting officers to try and prevent these abuses. It’s going to take a while to turn around a system that under the Bush Administration has resulted in favoritism to their friends at Halliburton and Blackwater while undercutting America’s small businesses.

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Arlington, Va.: Do you think changes to the "estate tax" law scheduled to begin in 2011 will benefit or harm small businesses?

John Kerry: I support taking care of estate tax reform before the law reverts in 2011.

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Atlanta, Ga.: What will your committee do to do to insure equitable distribution of venture capital dollars to minorities, women, and socially disadvantaged businesses through the SBA's Small Business Investment Company (SBIC) venture capital program? How will you address the lack of access to capital to these communities?

John Kerry: I share your concern, which is why I’ve held a hearing and sponsored two bills to address these issues. In May, my Committee held a hearing on the SBA’s programs for minority entrepreneurs. We also tried to address the concerns in our bipartisan bill that reauthorizes the SBIC program. The SBA needs to use its economic development tools to help close the wealth gap between whites and minorities, and so we increased the total funding that can be invested in an individual business – allowing an even higher amount for minority and women owned enterprises. For the socially disadvantaged, we expanded the New Markets Venture Capital program which also encourages investment in rural, urban and low-income areas.

I’ve also sponsored other legislation, which was passed by our committee in June, to expand access to capital, in particular for minority entrepreneurs. African Americans, Hispanics, Asians, and women are receiving far fewer small business loans relative to their share of the population and there has been no statistically significant improvement since 2001. We can do better.

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Washington, D.C.: You sponsored and passed in committee a bill called the Small Business Contracting Revitalization Act. As a minority business owner and advocate, one of my many disappointments with this bill was that it didn't really raise the net worth limits imposed on companies to participate in the 8(a) program. It gave an inflation adjustment from now on to a limit of $250,000 for entry into the program and $750,000 for participants. These numbers have not changed in decades, and force small and minority companies to never grow past $750,000 while in the 8(a) program or they are kicked out. Is this meant to be a business development or disincentive program?

John Kerry: I certainly believe that the current net-worth thresholds have hurt the growth of minority owned businesses. Although I'm supportive of increasing the net-worth thresholds there is a lack of support in the Senate for such a move. I need your help to create the kind of support for these changes that we both want.

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Washington, D.C.: Senator,

The Senate Small Business Committee just took up a bill that tried to reform a number of issues related to small and minority businesses in the federal marketplace. Why did your bill come short of reforming contract bundling, and instead just provided for a study?

John Kerry: First, my bill doesn’t just request a study on bundling issues. We require contracting officers to do market research and provide justification for consolidating contracts. It’s a first step towards addressing this issue -- contract bundling creates a barrier for small business competition. That’s why I’m working with the leaders of the Government Affairs Committee and the Armed Services Committee to more fully address bundling and other contracting issues. These Committees have broader jurisdiction over contracting, so we’ll have to work together to make additional changes to the law.

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Kent, Wash.: I have heard about women and minority grants but I have no idea of how to go about getting this assistance. Where should I begin?

John Kerry: The Small Business Administration does not provide grants to women and minority firms directly, but they do provide funding for business training and counseling through Small Business Development Centers and Women’s Business Centers. Your best bet is to contact one of these centers closest to you to find out about resources available to help you start or build a business.

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Lafayette, Colo.: Small businesses are the backbone of America’s economy and many small businesses provide vital goods and services to the federal government. There are hundreds of small business dealers that provide goods and services as well as competition to the federal government that benefits the taxpayers. The Department of Veterans Affairs Office of Inspector General issued a report on October 15, 2007 that recommends elimination of small business dealers.

Will the Senate Small Business Committee review the IG recommendations to determine if they are in the best interest of small businesses and the taxpayers prior to implementation by the department?

John Kerry: I’m always concerned when an entire category of small businesses is excluded from government contracting because of a study or report. There are many veteran small business owners for example, so it would be unfortunate if this policy had a detrimental impact on them. Although I respect the opinion and work of any Inspector General, I think that recommending the exclusion of a whole category of small businesses is at best premature. If a small business is inefficient or does not bring value to the work the agency wants carried out, the market will bear that out. To artificially end competition for some small businesses seems unwise.

I want to get more answers before any such recommendation is implemented.

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Marietta, Ga.: What other course of action do we have than raising the marginal tax rates on small business? Don't you feel that by doing so you are hurting job creation?

John Kerry: I’m concerned that the top marginal rate is too low, but I believe an increase would not impact small businesses and not impact job growth. Job growth over the last several years is lower than it was in the 1990s when tax rates were higher.

Unfortunately, that will have to be my last question, as they've just called a vote in the Senate. Thanks for your time and great questions and sorry I couldn't get to all of them.

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