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Entrepreneurs hope for help from new Congress

Here's how small business owners may be affected by the big changes happening in Washington.

By Jessica Dickler, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- All eyes will be on the 110th Congress when it convenes on Thursday, but small businesses will be paying particularly close attention to legislation in the works that could impact their bottom lines.

Small business owners could see several significant reforms under the first Democratic-controlled Congress since 1994, noted Dr. Chad Moutray, chief economist for the Office of Advocacy of the Small Business Administration (SBA).

Issues such as health care, loan programs and tax reforms for small business, as well as the minimum wage, all may be addressed on Capitol Hill this year.

Health insurance

"The big issue will continue to be the cost and availability of health care insurance," said William Dunkelberg, chief economist at the National Federation of Independent Businesses (NFIB).

Health care costs for small business have been a challenge for some time, of course. But when Massachusetts Sen. John Kerry was named chairman of the Senate Committee on Small Business and Entrepreneurship in November, he pledged to find coverage for the 27 million people who work for small businesses.

"We need to focus on making health care affordable for small businesses," he said in a statement issued in November.

According to Kerry, health insurance pools, where small businesses can purchase insurance policies in groups, may be the most likely short-term solution.

Small business loans

Kerry also promised to fight to preserve government-guaranteed loan programs at the SBA that have seen a decrease in federal funding in recent years, including the 7(a) lending program, the Microloan program, Small Business Development Centers and Women's Business Centers.

These loans, which were subsidized through federal appropriations until 2005, are a major source of long-term financing for small businesses.

"Minority and women entrepreneurs are growing in numbers, but the dollars they receive in small business loans has remained stagnant under the Bush Administration," Kerry said in a statement.

Chances are that the new Congress will restore the SBA's federal subsidy for starters.


Although experts agree that it is unlikely that the Democrats will make any major moves in the next two years that would unravel President Bush's tax strategy, it is highly possible that small businesses may get some tax relief in the near future.

Kerry has said he will work to "promote tax incentives to encourage investment in small businesses and restore fairness in the tax code for small firms."

"I think Bush would go along with small business tax breaks as long as they weren't offset by something onerous for big business," noted Greg Greg Valliere, chief political strategist for Stanford Group, a Washington research firm.

According to Valliere, the Democrats are likely to attach small business tax incentives to an Alternative Minimum Tax (AMT) bill this year.

Minimum wage

A possible blow to small business: Democratic House Speaker Nancy Pelosi's promise that boosting the federal minimum wage will be one of the first things the Democrats do.

As a result of the new law, small firms could be forced to raise prices, cut hiring or slash the hours of the low-wage workers the legislation is supposed to help.

According to the NFIB's Dunkelberg, a hike won't have that big of an impact on small business owners since 23 states have already enacted statutes boosting their minimum-wage rates above the federal rate.

But for the states remaining, it "won't be very helpful," Dunkelberg said. "That's a negative that we have to watch out for."

"Other than that, it doesn't look like much mischief will happen in Washington," Dunkelberg said, "and that's good."

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