Policy Agenda: Entrepreneurship & Freelance Economy
Small Business Majority Small Business Majority has created a comprehensive national and state policy agenda to ensure entrepreneurship is at the center of a thriving and inclusive economy. Supporting entrepreneurship and the freelance economy is one of our seven topics of focus.
Entrepreneurship is a potent force for positive change in a diverse society and economy-from addressing long-term unemployment to providing high quality jobs to helping revitalize distressed neighborhoods and rural communities. A healthy entrepreneurial ecosystem provides an innovative pathway for women, people of color, youth, veterans, disabled people and immigrants to enter the mainstream American economy and build income and independence.
We must to do all we can to ensure our economy flourishes by implementing the following policy recommendations to support entrepreneurship and the freelance economy.
Expand access to entrepreneurial assistance resources. Small business assistance programs are vital to the success of America's entrepreneurs, helping them navigate financing, government contracting and other components of business growth. Still, many entrepreneurs struggle to access these resources, particularly historically underserved entrepreneurs, like women, rural business owners and entrepreneurs of color. Existing programs must be maintained and expanded through policies such as the following:
- Support measures to provide more funding and resources for business assistance centers that provide vital education and outreach to business owners and aspiring entrepreneurs. For example, we recommend expanding support for Small Business Development Centers (SBDCs) by increasing both funding and awareness of their programs. The centers, including Women's Business Development Centers and the Minority Business Development Agency, provide vital resources for entrepreneurs to succeed.
- Promote SBA and other programs that foster peer-to-peer mentoring and encourage expanded procurement opportunities for very small businesses, particularly those owned and run by women and entrepreneurs of color.
- Increase the cap on the SBA guarantee to Small Business Investment Companies (SBICs) to $250 million to facilitate more financing opportunities for entrepreneurs.
- Ensure programs that support rural entrepreneurs maintain full funding. The 2018 Farm Bill provided outreach and assistance to socially disadvantaged farmers and proposed funding for programs like the Rural Microentrepreneur Assistance Program, Rural Business Development Grants and the Intermediary Relending Program. Lawmakers must work together to continue to pass bipartisan legislation that will give rural entrepreneurs and their communities opportunities to succeed.
- Support legislation to authorize tax-preferred "Small Business Start-up Savings Accounts," which would help pay for trade or business expenses, including the purchase of equipment or facilities, marketing, training, incorporation and accounting fees. These accounts should also allow for annual, nondeductible contributions of up to $10,000, subject to a $150,000 limit on total contributions to the account and adjustments for inflation.
- Create a "Startup Visa" for foreign-born entrepreneurs who wish to start a business in the United States. This visa would come with certain requirements, such as raising an initial amount of funding and creating a number of jobs for non-family members within a given number of years. A 2013 study by the Kauffman Foundation concluded that granting 75,000 such startup visas would create between 500,000 and 1.6 million new American jobs within 10 years.
- Support legislation like the Small Business Cyber Training Act, which would create an SBA program to provide resources and training for small businesses to improve cybersecurity.
Modernize licensing and certification requirements in a manner that continues to protect consumers, but improves business opportunities for lower-income entrepreneurs. Key policy elements include:
- Conduct regular reviews of state and local business licensing requirements and update outdated regulations. For example:
- Amend state licensing and permitting costs in order to spur growth in key industries. Connecticut established an Entrepreneurial Learner's Permit program that provides up to $1,500 in reimbursements for state licensing and permitting costs to first-time entrepreneurs in areas with high growth potential, like the information services, biotechnology and green technology industries.
Position independent entrepreneurs for success. Entrepreneurs are at the forefront of a changing employment landscape where online retailers, freelancers and contractors are the new version of the 9-to-5 office worker. Despite the fact that independent workers now represent one in three working Americans, the U.S. has not updated policies to address the needs of this new workforce. Policies must be implemented to allow independents to compete economically, including the following:
- Support easy-to-implement mechanisms for the self-employed to access paid family and medical leave and retirement benefits.
- Identify and fix tax issues unique to micro-enterprises and freelancers, such as burdensome quarterly tax filings for freelance employees. These quarterly filing requirements, mandatory for any freelancer who will owe more than $1,000 annually to the IRS, are onerous and leave independent workers vulnerable to costly fees.
- Align form 1099 reporting thresholds and streamline income reporting for independent workers.
- Establish a standard business expense deduction for independent workers.
- Pass healthcare tax equity for the self-employed, so that freelancers can deduct their healthcare expenses from their FICA tax obligations-just like other business entities.
- Ensure independent workers have full access to healthcare coverage provided by the Affordable Care Act, including fully funding outreach efforts to communicate the benefits of the individual healthcare insurance marketplaces to the self-employed.
- Expand access to shared workspaces, accelerators and incubators that provide the physical and operational infrastructure for entrepreneurs to start and grow new businesses. State and local governments can create initiatives to assist with rent costs for startups at these workspaces, accelerators and incubators, especially those located in Opportunity Zones.
- Support federal and state efforts to ensure that entrepreneurs can benefit from the Earned Income Tax Credit (EITC) program. As one of our nation's largest anti-poverty programs, expansion of the EITC can have a powerful effect on economic security for entrepreneurs and independent workers. States like California have expanded the EITC to include the self-employed.
- Adopt policies to make unemployment insurance (UI) available to non-traditional workers and reform requirements that penalize non-traditional work. For example, legislation can include the following ideas and proposals:
- Allow independent contractors with steady earnings to opt into state UI plans.
- Update eligibility criteria that often discourages or penalizes non-traditional workers, such as allowing recipients to seek part-time work and encouraging recipient training for non-traditional opportunities.
- Allow for a job-seekers allowance for low and middle-income independent contractors.
- Pass legislation like the Lifelong Learning and Training Account Act, which would make lifelong learning more accessible for low- and moderate-income workers by establishing a tax-preferred savings account with a federal match. It would also help solo entrepreneurs invest in their own development and acquire skills without the aid of an employer.
- Support funding and expansion of the Bureau of Labor Statistics Contingent Worker Survey (CWS) to generate more robust data on the freelance economy. More data will allow policymakers to better assess how regulations can be updated to fit the needs of freelance and independent workers.