Small business reeling, so Democrats decides to raise their taxes

NY Times:

Using only strips of canvas and a little rope, Scott Peterson walked up a 50-foot flagpole here to remove a star-spangled banner with reds faded pink. His ancestors used the same method: the family business, originally Harold A. Peterson Steeplejack, opened in 1926.

And it will probably close in 2009. The Great Recession, especially its stranglehold on credit and new construction, appears to have mortally wounded what the Depression could not kill.

“It’s not ‘Oh, I don’t have a job, I have to go find a new one,’ ” Mr. Peterson said. “We’re losing a corporation that is 83 years old. We’re losing our house. We’re losing our credit. We’re losing, other than our own physical bodies, everything.”

Recessions, like bullies, always pick on the weak, but few victims feel more beaten down these days than the millions of Americans with family businesses. Most run small operations with just a few employees, and failure often means closing an office with a parent’s name attached and deciding which relatives to fire.

They have been hit hard since the labor market began to weaken. Businesses with one to 19 employees, nearly all of them family run, lost 757,000 jobs from the second quarter of 2007 through the third quarter of 2008, according to figures from the Bureau of Labor Statistics, broken down by company size. That amounts to 53 percent of all private-sector losses for a group of companies with about 20 percent of all employees.

Recent surveys by the National Federation of Independent Business also show that small-business owners are reporting lower profits and fewer plans to add inventory or spend capital than at any time since the group began asking such questions in 1973.

Bill Dunkelberg, the federation’s chief economist, says the market is being “cleansed” of unneeded goods and services, but other researchers emphasize that this ignores the broader civic and social role that companies like H.A. Peterson and Sons have played since Paul Revere took over his father’s silversmith business in 1754.

“Outside looking in, people don’t understand that business has often been an organizing point for the family,” said Blaine McCormick, a professor at the Hankamer School of Business at Baylor University, who worked in his family’s oil business growing up. “Everyone works in it; it’s our livelihood and it’s a meeting place where we form our identities and the stories that carry us through life.”

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But this is the group that House Democrats are targeting to pay for their health care plan. While they claim to be taxing the wealthy, the biggest impact will be on small businesses who are struggling just to stay alive. Raising taxes on them at this point will mean further unemployment and less job creations. It is another reason why Democrats are losing ground in the polls and issue after issue.

See more on the small business surtax here.