by ALFREDO ORTIZ
Just before the COVID-19 crisis struck, America had record-high employment rates and the economy was roaring. But economic hardship changed the business environment for nearly all industries, leaving millions of Americans jobless. As the country rebuilds, government leaders should rely on a legislative toolkit that has supported Americans in the past.
Main Street businesses are among the hardest hit – especially hotels that have been operating at extremely low occupancy rates. In April, the occupancy rate dropped to just 24.5 percent – a 43.5-percent decline for the same month the previous year.
Many independent stores have been forced to make difficult decisions due to the crisis, including laying off employees or cutting salaries. A report released by the National Bureau of Economic Research (NBER) in April found that since the end of January, small business employment fell by 32 percent for full-time workers and by 56 percent for part-time staff. Furthermore, it reported that more than 100,000 small businesses won’t be able to reopen their doors to the public.
Small businesses have always been vulnerable because of modest financial resources. But the pandemic has exacerbated the vulnerability.
LEGISLATION MUST PASS SWIFTLY
Swift action from legislators, including the passage of the Paycheck Protection Program, provided immediate relief to millions of small businesses. This bipartisan success story was a lifeline businesses needed and a stepping stone in the right direction to protect Main Street. Nearly five million businesses received a loan, which helped to directly save 51 million American jobs.
But loans simply won’t be enough. As the country recovers, the Trump administration must continue to push for legislation that will get the economy humming again, all while avoiding unnecessarily adding to the bloated debt.
PAYROLL TAX HOLIDAY
One idea is a payroll tax holiday. When the Trump administration passed the Tax Cuts and Jobs Act in 2017, the economy quickly experienced a resurgence. In a similar way, a payroll tax holiday would jumpstart the financial recovery by benefiting both employees and employers. Uncle Sam collects roughly 7.5 percent of every employee paycheck and then turns around and takes the same from the business. Allowing employers and their staff to temporarily keep more or all that money – targeting businesses with fewer than 100 employees – will act as a pay bump for workers and a tax cut for businesses. It’s an economic stimulus program that lets American families and businesses decide where to spend their money, not government officials.
Under the policy, someone who makes $40,000 per year would take home an extra $250 every month.
Continuing to cut regulatory red tape is another approach that will boost businesses and the economy. In the first 11 months of President Trump holding office, 1,500 planned regulatory actions were canceled or delayed. Moreover, under a previous executive order, two regulations were required to be eliminated for every new one added. This is just a snapshot of the deregulation that has taken place. To help get the economy back on track, we can’t stop now.
Government regulations can often be as burdensome on companies as high taxes. Compliance requires time and, in some instances, extra staff. As with high taxes, small businesses also are the most severely affected. With the added stress of the pandemic and the un-certainty it has brought to Main Street, it’s the perfect time to continue to examine the red tape that hinders their success. The Mercatus Center agreed with this sentiment in a recent report saying, “[r]egulations are one of the greatest barriers to success facing small businesses.”
The U.S. economy is in a fragile state but using similar tactics that helped build the strongest economy in decades can be used once again to help the country claw back to prosperity. The success of small businesses depends on it.
Alfredo Ortiz is the president and CEO of the Job Creators Network.