Small biz unsure about ’07: Legislative agenda is clear, but advocates still worried

Big changes at the Statehouse, including a shift to Democratic control in the House of Representatives and a leadership switch in the Senate, mean there are more unknowns and more unpredictability.

Meanwhile, top issues such as health insurance, tax reforms and regulatory changes provide a minefield of concerns for small-business owners. New health insurance mandates could add to already skyrocketing premiums. New local taxing authority could increase the burden on small businesses. Changes to the state’s regulatory structure could dramatically affect bottom lines. “There are a lot of unknowns,” said Jason Shelley, state director of the National Federation of Independent Business. “But so far, the tone has been good. Both sides have talked about working together. We hope that’s exactly what happens.”

Shelley, who is leaving the group in January, said NFIB’s top priorities for the legislative session are to limit increases in health care costs and ease the tax burden on small businesses.

A major issue for small business in 2007 will be property-tax reform tied to Hometown Matters, a program that would give cities and towns more tools to finance local government. Of course, more tools means more taxing options, said Ed Feigenbaum, publisher of the Indiana Legislative Insight newsletter.

“When that happens, everybody gets concerned,” Feigenbaum said. “Small businesses will have to keep their eyes open to make sure they are not unnecessarily burdened with tax increases at the local level.”

Another big issue will be changes to the state’s regulatory structure. A report from the state’s Office of Management and Budget recommends a myriad of modifications that could affect small businesses.

Some such changes include greater tobacco enforcement tools for the Alcohol and Tobacco Commission and authority for the Indiana Excise Police to use minors to test compliance with the state’s alcohol laws-possibilities that could affect small retailers.

The OMB also suggests legislators reduce an allowance the state gives businesses in exchange for collecting sales taxes. The report says the change is justified, since calculating and collecting sales taxes has become cheaper for businesses. Setting a $10,000 cap on the allowance would allow the state to keep $11 million it had been paying to businesses, according to the report.

The sales tax change probably won’t hurt many small businesses, since only larger businesses collect enough in sales taxes to exceed the suggested limit.

The loss of Shelley, a veteran lobbyist, adds a level of uncertainty for small-business interests since his replacement has not yet been hired. And handicapping what legislation will pass is difficult because of changes in Statehouse leadership.

Gov. Mitch Daniels had the benefit of a Republican majority during his first two years in office, so observers are interested in how effectively he works with Democrats, who now control the House. And longtime Senate leader Bob Garton, a Columbus Republican, lost the May primary and has been replaced by Republican David Long of Fort Wayne.

One idea that Democrats and Republicans seem to agree on is full-day kindergarten. It would benefit many small businesses, since employees would be free to work more hours, said Victoria Hall, director of the Central Indiana Small Business Development Center.

Hall’s biggest worry for the session is that legislators might scale back economic-development programs and grants. But she doesn’t think that is likely.

“I expect it to be a quiet session as far as impacts to small business,” Hall said. “I’d be surprised if there’s anything there that makes us go ‘oh no.'”

John Raine, president of Andersonbased Raine Inc., is worried most about taxes and health care costs. His company, which employs 14, manufactures nylon holsters, pouches and cases for military, police and paramedic uses.

The company offers health insurance to its employees, but premium increases have averaged 25 percent a year.

“It just seems to be going up and up and up,” Raine said. “I’m looking for a market-based solution to health care costs.”

Raine said he supports the governor’s plan to raise cigarette taxes to pay for coverage of uninsured Hoosiers. But he doesn’t support giving local government more taxing authority. He worries that would be detrimental to job growth.

Feigenbaum sees a familiar concern as the biggest threat for small business: increased taxation.

But there are potential issues all over the map.

“Small business will have a lot on its plate this session, when you get down to the nitty-gritty details of legislating,” Feigenbaum said. “It will be a session that keeps people biting their nails until the very end.”