The new year is well underway, and change is in the air. America’s gyms are a little bit fuller, Americans are planning family getaways and romantic excursions, and the 2020 election is drawing nearer with each passing day.
What hasn’t changed in 2020, however, is the optimism of the small business community. According to a National Federation of Independent Business (NFIB) survey, small business owners expecting an improvement to business conditions recently increased by three percentage points to a net 16 percent. In December, more than 75 percent of small businesses retained or expanded their employee headcount. Nearly 20 percent of small business owners, meanwhile, plans to create new jobs.
Equally optimistic are industry experts. As NFIB Chief Economist William Dunkelberg put it, “Owners are aggressively moving forward with their business plans, proving that when they’re given relief from the government, they put their money where their mouth is, and they invest, hire, and increase wages.”
Dunkelberg is referring to the Tax Cuts and Jobs Act (TCJA), signed into law by President Trump in 2017. Since the TCJA became law, more than 900 U.S. employers—many of them small businesses—have announced new hires, pay raises, and other employee benefits.
It’s Economics 101: Lower rates and increase deductions, and employers suddenly have more resources at their disposal to invest in business expansion and job creation. Send less money to Uncle Sam, and private-sector job creators are empowered to reward those who depend on them—job-seekers, employees, and their families. On the other hand, pessimistic employers are generally more risk-sensitive, cutting costs instead of ramping up investment.
Think about it on a personal level. Based on research from the left-leaning Tax Policy Center, the TCJA provided roughly 80 percent of Americans with tax relief—not just the “one percent,” but 80 percent. U.S. households now pay, on average, $1,300 less in individual income taxes per year. With $1,300 more dollars in your pocket, you have $1,300 more dollars to spend on your monthly rent, student loan repayment, groceries, and other expenses.
Tax relief means greater purchasing power. That same logic applies to small business owners. From buying new equipment and opening another location to hiring recent college graduates, that growth in purchasing power translates to economic growth in the long run.
What benefits small business owners benefits the economy writ large. After all, America is home to more than 30 million small businesses, employing nearly 60 million workers—half of the U.S. workforce. Over 280,000 of those businesses are exporters, operating domestically but also active in the global marketplace.
Of course, the U.S. economy also benefits from the presence of large corporations. But even a business employing thousands of workers sees increased revenue and higher growth potential when its smaller counterparts are prospering.
Take Amazon, which relies on small businesses to expand their online product offerings. The more small businesses that sell their products on Amazon, the more choices Amazon’s customers have, and the more likely they’ll be to use Amazon in the future. It’s a win-win situation, as small businesses are also exposed to millions of Amazon shoppers—customers they wouldn’t necessarily have found otherwise.
There’s a reason why more than two-thirds of small business owners who sell a product online claim that Amazon has positively impacted their sales. It’s a testament to the mutually beneficial relationship between businesses large and small, whose collaboration is inextricably linked to economic growth.
All of this bodes well for 2020. If the new year is yet another year of small business optimism, we are likely to see further surges in business expansion and job creation.
That sounds like quite the “Happy New Year.”