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A Magazine of Ideas

Why Small Business Owners Trust the Tea Party

Wednesday, November 17, 2010

Businessweek thinks Tea Party policies will harm small business. Think again.

In a recent Businessweek story entitled “Why Business Doesn’t Trust the Tea Party,” Lisa Lerer and John McCormick explain that the Tea Party platform is inconsistent with the goals of most business people. The Tea Party might sound good to those in business, they wrote, “as long as the corporation in question doesn’t have international operations, rely on immigrant labor, see the value of national monetary policy, or find itself in need of a subsidy to boost exports or an emergency loan from the [Federal Reserve] to survive the worst recession in seven decades.” While designed to show why business owners should not support the Tea Party, Lerer and McCormick’s statement actually demonstrates why so many small business owners are Tea Party supporters.

Few small businesses have international operations, rely on immigrant labor, use export subsidies, or get emergency loans from the Fed. And few can see a direct connection between the Federal Reserve’s monetary policy actions and their day-to-day business activities. The issues on which big business and the Tea Party disagree are not those small business owners are passionate about.

On the other hand, the Tea Party movement has been advocating many positions that small business owners consider important. For instance, the Tea Party calls for cutting taxes, getting the Patient Protection and Affordable Care Act (PPACA) repealed, and reducing government regulation.

The issues on which big business and the Tea Party disagree are not the ones that small business owners are passionate about.

Successful small business owners are among those who face a big tax increase if the Obama administration lets the Bush tax cuts expire. And Tea Party supporters believe that raising taxes on small business is a bad idea. A Winston Group survey of 1,000 registered voters in January 2010 showed that 37 percent of surveyed Tea Party supporters believe that cutting taxes on small businesses is the best way to create jobs, compared to 28 percent of registered voters generally. Eighty-five percent of Tea Party supporters believe cutting small business owners’ taxes would be more job-generating than spending more federal money on infrastructure, while only 9 percent believe the reverse. For registered voters overall, the numbers were 61 and 31 percent, respectively.

The cost of the PPACA falls heavily on small business owners, who face the difficulty of coming up with the money for employee health insurance or paying tax penalties. In 2010, the Kaiser Family Foundation reported that approximately 99 percent of businesses with more than 199 employees offered healthcare coverage to their employees, but only 68 percent of companies with 3 to 199 workers did (and 59 percent of those with 3 to 9 employees).

Small business owners also pay the largest cost adhering to the mountain of regulations that come out of Washington.

Small business owners also pay the largest cost of adhering to the mountain of regulations that come out of Washington. A paper by Nicole and Mark Crain of Lafayette College explained, “As of 2008, small businesses face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms (defined as firms with 500 or more employees).”

Philosophically, small business owners are more likely than the rest of the electorate to believe in small government. A Wall Street Journal/NBC poll conducted in late August showed that, while only 47 percent of Americans believe that the government is doing too much, 65 percent of small business owners think that.

Given all this, it should not surprise anyone that many Americans see the Tea Party as representing the beliefs of small business. A poll conducted over the summer by SmartBrief found that 57 percent of those queried saw the Tea Party’s positions as pro-small business, while only 23 percent saw them as anti-small business.

Whatever your personal views of the Tea Party platform, it is difficult to argue that the party’s positions are inconsistent with the beliefs of many small business owners. As long as small business is considered part of business, we cannot say that “business doesn’t trust the Tea Party.”

Scott Shane is the A. Malachi Mixon III Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of Born Entrepreneurs, Born Leaders: How Your Genes Affect Your Work Life.

FURTHER READING: Shane asks "Why Are There So Few Female Entrepreneurs," wonders “Why Small Businesses Aren’t Hiring,” and explains why credit proposals offer “No Way to Help Small Businesses.” Arthur Brooks lists the "Top Ten Ways Government Kills Jobs in America" and Michael Novak bids "God Bless the Tea Party."

Image by Rob Green/Bregman Group.