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The issues small business will watch closely in 2023

Mike O’Halloran is the Maryland state director for the National Federation of Independent Business.

Mike O’Halloran is the Maryland state director for the National Federation of Independent Business.

Inflation. Supply Chain. Labor Shortages. Those three things might be the easiest way to sum up 2022 for small businesses. The National Federation of Independent Business’s (NFIB) Optimism Index is still below its 49-year average meaning business owners are not very hopeful about the future. No doubt much of this unease is attributable to the discord in Washington where Congress and the White House are perpetually gridlocked. There’s a historic amount of federal dollars available to help local economies gut out a comeback but small businesses continually face obstacles. NFIB’s jobs report in December shows labor quality as a top operating problem for small employers. And while the same report has job openings down a couple of points, the 44% percent reading from small business owners stating they have job openings they could not fill far exceeds the historical average of 23%.

In Annapolis, there will be a lot of change as a new governor, comptroller, attorney general, and general assembly will be sworn in. There’s no doubt new policymakers will have their own ideas on how to solve the problems facing Marylanders. They’ll be making the transition from campaigning to policy making and NFIB will be there as a resource to understanding what small businesses need from their representatives. Certainly, there will be differences of opinion on policy, but a focus must remain on improving Maryland’s business climate. Progress has been made over the years, but a fragile recovery and fears of a forthcoming recession should stop policymakers from enacting anything that makes it harder for small business owners to attract, hire, and retain job seekers. Small business is the backbone of our state’s economy, and anything passed by the general assembly should reflect that.

There will be a variety of issues important to small business this coming year. Some of them will have an immediate impact on their bottom line and others will set them up for future success – or failure. Below are issues NFIB will watch closely during the 90-day legislative session beginning January 11.

Minimum Wage

It was less than four years ago that the general assembly passed a statewide $15 minimum wage over the objections of small businesses. Our members fought hard to show the compounding effects the move would have on their ability to run a business. Ultimately, the legislature pushed forward with the ill-advised proposal. Despite our objections to the bill overall, legislators acknowledged some concerns from the business community by adding amendments. Namely, allowing businesses with 14 or fewer employees more time to ramp up to $15.

But now, policymakers, including the governor-elect, are signaling their intention to speed up the phase-in. On top of that, there’s likely to be an effort to tie the state’s minimum wage to inflation. The state’s gas tax, which has annual increases tied to inflation, jumped 18% this past summer. Small businesses can’t afford an increase like that year after year.

Taken together, these proposals would have an outsized and devastating impact on Maryland small businesses.

The fact is small businesses are already voluntarily raising compensation to attract and retain talent. NFIB’s November jobs report showed a net 40% of owners increasing compensation. Arbitrarily raising the state’s minimum wage faster than what our members planned for, and at a time when many are already doing so will only hurt our smallest businesses. Particularly in industries like retail and hospitality which are still struggling to reach pre-pandemic staffing levels.

If House Bill 698 from 2022 were enacted – a bill that similarly would have accelerated the $15 minimum wage – a small business owner with 15 employees would have seen their labor costs jump more than $50,000 in the final six months of the year. That is simply unsustainable.

Unemployment Insurance

The state’s Unemployment Insurance Trust Fund (UITF) faced unprecedented stress during the pandemic. The record number of claims from 2020-2021 caused employers’ UI taxes to skyrocket, with some seeing 400-600 percent increases on tax bills during the first quarter of last year. The table of UI tax rates jumped from A (the lowest) to F (the highest) in 2021. Thankfully, NFIB with the help of legislative leaders and the Hogan Administration got legislation passed to lower employer rates to Table C in 2022 and for 2023.

However, the relief may be short-lived as some policymakers are likely to seek an increase to the weekly benefit amount that claimants can receive. There’s also talk of tying the benefit amount to inflation as well. Increasing the amount would not be wise on the heels of an economic crisis that depleted the UITF at a rate never seen before. And linking future benefits to inflation will only make it harder to keep employer tax rates low. Remember, only employers contribute to the UITF in Maryland. Other states like New Jersey and Pennsylvania include worker contributions into their funds. It’d be a very tall order to increase payouts while asking small businesses to foot the bill.

Maryland sits on a “historic” general fund surplus. This session, NFIB will work with any legislator willing to improve Maryland’s business climate by investing this surplus responsibly and wisely to help our small businesses and communities, not to increase the cost of doing business in Maryland.

Mike O’Halloran is the Maryland state director for the National Federation of Independent Business.

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