Last month, Stacy Mitchell, co-director of the Institute for Local Self-Reliance (ILSR), testified at a Congressional Progressive Caucus forum on how federal public policy is skewed to favor big corporations and places small businesses at a competitive disadvantage. The Congressional Progressive Caucus consists of one U.S. senator and 75 members of the House of Representatives. The forum, “A Good Jobs Strategy for the Low Wage Economy,” was held April 15.
In her testimony, Mitchell stressed that when federal policy favors large, low-wage corporations, it is not only workers who are adversely affected, but independent businesses as well. She reported that over the past 15 years, the overall market share of small firms (fewer than 100 employees) has dropped from 33 percent to 28 percent.
“The decline of small business … is harming our economy, weakening our ability to create jobs, and undermining the well-being of our communities,” Mitchell said. “It’s tempting to dismiss the decline of small business as simply the result of market forces, but that view ignores the political influence of large corporations. Much of federal policy now works to bend the marketplace in their favor, putting both workers and small businesses at a competitive disadvantage. Federal subsidies, grants, tax credits, loan guarantees, and other forms of financial support all heavily favor large, low-wage corporations over responsible small businesses.” She added that tax loopholes also create an uneven playing field, “resulting in small businesses paying an effective federal tax rate that is several points higher than that paid by big corporations.”
Small businesses have trouble accessing capital, Mitchell said, and even the Small Business Administration “in some respects, caters to the needs of the world’s largest and lowest-paying corporations. Between 2003 and 2012, the SBA, under its flagship 7(a) loan program, backed over 32,000 loans to fast-food and other retail franchises, like Quiznos, Subway, and Cold Stone Creamery.”
Pointing to the 2015 Independent Business Survey, Mitchell noted that 30 percent of the indies surveyed reported being unable to secure a loan. The survey, conducted by ILSR in partnership with Advocates for Independent Business, gathered data from more than 3,000 locally owned businesses, including members of the American Booksellers Association.
“We believe the SBA should cease offering loan guarantees to low-wage franchises and shift that support to independent businesses,” Mitchell said. “Indeed, federal statute requires that the SBA support only businesses that are ‘independently owned and operated.’ We believe that the contractual terms governing most franchise relationships are such that these establishments hardly qualify as ‘independent.’ This is just one of several ways we believe public spending and support for business needs to be overhauled to create a level playing field for both small businesses and workers.”