Walking the Walk on Boosting Small Business | Eastern North Carolina Now

   Publisher's note: This week's "Daily Journal" guest columnist is Contributor Donna Martinez, Carolina Journal, Radio Co-Host, John Hood Publisher, and Right Angles blogger.

    RALEIGH     When I walked in the door, I could tell something was up with the owner of a small business I frequent. We talk about current events and politics when I stop by, and since he's progressive and I'm a socially conservative free marketer, our conversations are lively. This day, his grin made me think he was ready to unload about a conservative politician who'd done something silly.

    It was just the opposite. My liberal friend had just learned he will benefit from a 2011 decision by Republican budget writers to exempt the first $50,000 of business income from state income tax. Sole proprietors like my friend are among those the deduction aims to help.

    And it does.

    "I jumped, I clapped, I danced," he said when I asked how he reacted when his accountant told him why he will be keeping several thousand dollars more of what he earned last year. I barely had the chance to congratulate him before he launched into a list of new supplies he plans to try out -- something he's wanted to do for a long time, but couldn't scrape together the cash.

    Similar stories are playing out across North Carolina as tax filers -- many of them sole proprietors -- discover how this support is impacting their businesses and lives. Last month, Laurie Johnson told the Charlotte Observer the deduction "was a gift from God." She and her husband's building and remodeling business had barely survived harsh economic times. The deduction, she told the newspaper, will allow them either to replace an 18-year-old vehicle or to help pay for new employees.

    As usual, there is loud, entrenched opposition to allowing people to keep more of what their sweat and skill have earned. This deduction is a gift to millionaires, a tax break for those who don't need it, critics charged. Not according to General Assembly researchers, who estimated that 69 percent of those who will benefit from the deduction have less than $50,000 in taxable income. What about all those millionaires standing in line to rake in the dough? Only 1 percent of those who will benefit from the deduction have more than $1 million in taxable income, according to the estimate.

    Like Laurie Johnson, my friend plans to spend his refund, but others will save it. Some will give an employee a raise, some will expand a product line. Others will buy kids' school clothes, and others will upgrade computer systems. Some will move to a larger space, and some will hire an employee. But no matter what they do, the person who earned the money will decide its best use, not a government official.

    Legislators who supported this deduction understand that a state enduring the misery inflicted by the fifth-highest unemployment rate in the country must reverse course and adopt policies that help the men and women who fuel our economy and create most of its jobs. We need entrepreneurs to succeed, whether they're mom-and-pop startups, or bigger, more established operations. If they don't, neither will those of us who rely on them to put food on our tables and supply us with goods and services.

    My friend exemplifies many entrepreneurs. He's wanted to work for himself for as long as he can remember and, over two decades, built his operation with repeat customers like me. Some people, however, are what economists call "necessity entrepreneurs." Thanks to years of detrimental federal and state policies that have made long-term unemployment common, these experienced, able-bodied men and women simply can't find a job working for someone else. Venturing out on their own is their only option for earning a living.

    Here in North Carolina, nearly 35,000 people started a new business between 2010 and 2012, according to the 2012 Kauffman Index of Entrepreneurial Activity. Nationwide in 2012, the business creation rate continued above prerecession levels, with 514,000 people beginning something new each month. Startup activity continued to grow in the 35-to-44 and 55-to-64 age groups.

    These risk-takers deserve our admiration and support. Some state legislators realize it, and now at least one liberal in my life understands that some policymakers are content to talk the talk, while others actually walk the walk.