Employer Services company ADP released its September estimate for job growth numbers today, and showed an increase in employment of 162,000 jobs, beating expectations. Small business continues to be the driving force in the jobs recovery, adding half of the jobs in September. Ward McCarthy, chief financial economist at Jefferies & Co. Inc. in New York, stated that “Hiring at startup and small firms will continue to be the key to the sustainability of the labor market recovery going forward.” ADP’s number is an important predictor of the Labor Department’s statistics, which will be released on Friday.
IHS Global Insight recently prepared a study for IFA on the economic outlook of franchising, and forecasted employment growth in the franchising industry slightly outpacing that of the whole economy. They noted, however, that job growth remains tepid and that access to credit is still a major obstacle to to the expansion of franchising. Read more about the study here. Job creation is sure to be a central focus of tonight’s presidential debate, which will cover domestic policy. You can read more about today’s jobs numbers here.
On September 24, Congressman Sean Duffy visited The UPS Store in Hudson, Wisconsin to learn about the technology side of UPS and see the routing of a package addressed to him. Owner Al Snyder spoke with the congressman about UPS’s role in global commerce and small business as well as the issues he faces as a small business owner himself. Members of IFA’s Franchise Congress regularly reach out to develop and establish relationships with their legislators to advocate on behalf of the small business community. Learn how you can join IFA’s advocacy efforts here.
As states scramble to increase revenue in the economic downturn, many are turning towards ambiguous bits of tax code to increase their coffers. Of particular concern to the franchise industry are recent attempts to assess corporate income tax on businesses that operate in a state but don’t have a physical presence or employ anyone there. Amongst the frustrated business owners affected by these predatory tax policies is IFA Board member Catherine Monson, CEO of Fastsigns International, who was recently profiled in a Fiscal Times piece on state taxation policies.
Even though franchisors do not directly employ their franchisees, many states have attempted to tax franchisors for the business activity of their franchisees. What is most shocking is that Monson was sent tax bills from seven states that don’t have a Fastsigns franchisee, and was forced to pay income tax where she has no physical presence or employees. While this has become a common problem for franchisors, franchisees are being thrown into the state business tax frenzy when state departments of revenue send tax bills for business done across state lines, such as purchasing inventory or supplies. Some businesses have even been taxed in states simply for driving through them.
Despite such obviously abusive practices, response from the Federal government, which is mandated to regulate commerce between the states, has been marginal. Last summer, the House Judiciary Committee passed The Business Activity Tax Simplification Act, or BATSA, which aims to limit the ability of states to tax businesses without a meaningful presence in their state. Unfortunately, the bill has stalled in the House and has never been brought to a full vote despite bipartisan support. At a moment when we are facing unprecedented economic, political, and regulatory uncertainty, it is increasingly important that Congress passes legislation like BATSA to promote tax certainty, growth and job creation.
To tell your legislators about the tax policies that impact your business, attend the 2012 IFA Public Affairs Conference, September 10-11 in Washington DC. Click here to register and for more information.
President Obama’s latest proposal to extend the Bush tax cuts solely for those making less than $250,000 per year presents a new threat to franchise businesses and the jobs they create. Since more than 80 percent of franchise businesses file their business income on their personal income tax return, they could be subject to a substantial tax increase under the President’s proposal.
According to the Wall Street Journal’s editorial page:
“Mr. Obama claims this will merely return rates to what “we were paying under Bill Clinton, It ignores his ObamaCare tax increase of 0.9% on top of the current 2.9% Medicare tax, plus a new 2.9% surcharge on investment income, including interest income.
Other small business advocates were equally unimpressed with the President’s latest proposal. In response, House Small Business Committee Chairman Sam Graves noted:
“Small businesses are facing an enormous amount of uncertainty and anxiety about upcoming tax policy, the President is bent on increasing taxes on the very people we need to invest in the private sector.”
Graves and the WSJ both cited a nonpartisan Joint Committee on Taxation report that estimates the President’s latest proposal would increase taxes on 53 percent of pass-through business income and about 940,000 small businesses.
“In a stagnant economy, it makes no sense to raise taxes on anyone, especially small businesses,” said Graves.
IFA believes the uncertainty created a one-off, piecemeal approach to tax policy hinders business planning by franchisors and franchisees, thereby discouraging investment and hiring. While there are positive signs the franchise industry is poised for growth in 2012 following the recession, our projections are still as much as 50 percent below pre-recession levels. It is unfortunate the President’s latest tax proposal will do little to alleviate the deficit while further slowing the tepid pace of job creation. IFA is in favor of extending all of the current tax cuts in order to create the incentives for hiring and stable business environment needed to grow our economy and favors a comprehensive approach to tax reform that tackles both corporate and individual rates.