Posted on 04/17/2010 6:14:39 PM PDT by CutePuppy
Obama: Is He Helping Or Hurting Your Business?
Timothy Shea has been providing IT solutions for 21 years and has never worked as hard or felt as much economic pressure.
Shea, CEO and senior consultant at Alpha NetSolutions, a solution provider based in Marlborough, Mass., says his income as the owner of an "S" corporation that files a personal tax return has dropped 25 percent from 2007 to 2009. At the same time, the health-care costs for his eight-employee, $1.2 million business have doubled over the past three years.
Shea is one of many small-business solution providers interviewed for this cover story who feel that federal economic policies negatively affected business during that period. What's more, these solution providers say, looking ahead they don't see how the successful passage of President Barack Obama's landmark health-care reform bill, which Obama signed into law on March 23, will help.
Shea is one of tens of thousands of small-business IT solution providers in the U.S., working in a field that for decades has created almost unimaginable personal wealth and countless jobs. But over the past year, many of these businesses have closed their doors and many more are struggling in the midst of what by all accounts is the biggest economic downturn since the Great Depression.
Research from CRN parent Everything Channel shows that after reaching a high of 250,000 in 2007, the number of solution provider businesses in the North American market dropped to 200,000 in 2009 as IT spending declined. Most of the solution providers that closed up shop generated less than $1 million in annual revenue.
And the squeeze is continuing.
Everything Channel's Institute for Partner Education & Development, which provides channel research, consulting and education, reveals that the number of solution providers rated as "in trouble" based on net income data jumped to 9.3 percent in 2010 from 5.8 percent in 2009. .....
Through all of this, many small-business solution provider owners feel that Obama has showed little understanding of the economic forces battering their businesses -- and is showing little fiscal restraint as they themselves are cutting back and pinching pennies to stay afloat. .....
Next: Much Ado About Health Care
Many of the small-business solution providers interviewed for this story give credit to Obama for attempting to address the rising costs of health care. But they just don't see how the new health-care reform law -- which provides coverage to 32 million uninsured Americans at a cost to the government of an estimated $938 billion over 10 years -- will help their businesses. They say it does not address the underlying issues driving up health-care costs, even though the legislation provides a tax credit to small businesses with fewer than 25 workers for purchasing health-care coverage.
"I can't imagine how much worse health care can get for small businesses than it is now," said Shea, who calls himself a moderate conservative. "Unfortunately I'm afraid I'm about to find out how much worse it can get." .....
They point instead to the latest posting from the Treasury Department showing that the national debt has increased more than $2 trillion since Obama took office. And even though Obama has said that government cannot continue to spend as if deficits do not matter, he has proposed in the fiscal year 2011 budget to add $8.5 trillion in debt over the next decade. .....
However, Gregg Pickens, president and owner of Digital Dot Systems, a $1 million solution provider with four employees, believes that government legislating health care is not the answer. He says that in 10 years of running his business, 2009 was his worst year ever, with his income down 40 percent.
Pickens' advice to Obama: "You need to focus on getting the economy moving so businesses are healthy and people are put back to work. I don't care how affordable he makes health care. If you don't have a job you can't afford it.
"Uncertainty and unemployment are the biggest issues," said Pickens, a self-proclaimed fairly conservative Republican. "If we don't have clients growing themselves, then we don't grow."
These solution providers say they are looking for tax relief as they try to come to grips with higher taxes and even higher services fees in lieu of taxes. Add to all this the fact that some state Departments of Revenue are now closely scrutinizing whether managed services, the healthiest part of the IT solution provider business, should be taxed.
At the same time he has bet big on health-care reform, Obama has also pressed to eliminate tax breaks from former President George W. Bush due to expire at the end of this year. .....
"My taxes are going up under Obama," said one solution provider owner who did not want to be identified. "I'm not a fan of anyone who wants to raise taxes and spend their way out of problems." Citing the budget deficit, the business owner said: "Spending $1.4 trillion when you don't have it never made anything better. We are now one of the largest debtor nations in the world.
"As individuals, if we ran our household budgets the way the country is run, we would all be bankrupt," added the CEO. "Every damn one of us. We are a country of individuals where for the most part the vast majority of us are fiscally responsible. But we have to fund a government that has forgotten what fiscal responsibility is."
The CEO said that eliminating tax breaks for those making more than $250,000 hurts small businesses like his own.
"The net income from your balance sheet flows through to your taxes," he said. "And don't confuse cash with net income. They are two entirely different things. My income stayed the same last year but my taxable income went up 5 percent."
Digital Dot Systems' Pickens says the problem is most government officials don't understand the pressure facing a small business.
"I don't think they understand the dynamics of what it is like to run a business," he said. "They are lawyers and career politicians. To them, profits are something to be taxed." .....
The Credit Squeeze
Small-business solution providers are also dealing with a credit noose that has tightened around their neck.
Berzack sums up the feelings of many solution providers: "In 2003 to get $100,000 of credit just required a signature. Now I think it requires a 100-page application including the blood type of my children." .....
"Obama and the administration are talking about all the solutions they are putting in place to help the small business and all we are seeing is banks not lending, and vendors scrutinizing credit lines to the point where if you are one day past 30-day terms they hold up your order," he said. .....
A Touch Of Optimism?
Shea, however, is optimistic that his business prospects are improving in 2010 with his sales potentially increasing as much as 40 percent despite anything President Obama does or does not do. That said, he points out that when he started his first business President Ronald Reagan was grappling with a recession and there was a different feeling in the country.
"The difference is at that time no one had any doubt we were going to get out of it pretty quickly," he said. "Now it's an unknown." Shea said he has not been politically active given that he is working 70-hour-plus weeks trying to keep his business going.
"Everything that has happened with Obama and health care has me rethinking that," he said. "There are many small-business owners like me working 70 hours a week. We barely have time to keep up with business. With what is going on in this country maybe it is time for all of us to get up and get involved."
I have certainly seen some of that. You're probably right that this is a big factor.
I sell insurance and represent Anthem Blue Cross. What you think... are they hurting my business?
They are hitting and squeezing middle class, the wealthy can either defer or transform or move "income" into lower-taxed vehicles, instruments or locale, or pass along the increases in taxes in ways that are not available to middle class.
That's a tough one... I'll have to get back to you on that.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.