The NO BOSS Act Strengthens American Entrepreneurship – and Policymakers Should Do More

July 16, 2024

  1. Capital
  2. Regulation
6 minutes

The United States is currently enjoying remarkable economic circumstances.  Economic growth, though slower than late last year, remains among the strongest in the industrial world; unemployment has remained at or under 4 percent for 31 months, the longest stretch in 50 years; inflation sparked by emergency government spending and supply chain disruptions during the Covid era, has cooled significantly and is nearing the Federal Reserve’s target rate; and stock markets are celebrating, hitting record highs in recent weeks.

Not unrelatedly, entrepreneurship in America is also booming.  Monthly new business applications continue their four-year surge begun in the spring of 2020, and a recently released study finds that majority of Americans have an interest in launching a new business.  Based on a survey conducted in early May, the Shopify/Gallup Entrepreneurship study found:

  • Sixty-two percent of surveyed adults would prefer to be their own boss, while 35 percent prefer working for someone else.
  • Out of those who want to be their own boss, more than half said they would be willing to accept at least a fair amount of financial risk to do so, with about 15 percent reporting a willingness to take “great deal” of financial risk.
  • Fifty-seven percent of surveyed business owners and 60 percent of aspiring entrepreneurs indicated being their “own boss” as the top motivation for starting a business, followed by an “opportunity to earn more money” and the desire for a “more flexible work schedule.”

The continuing surge in new business applications and the findings of the Shopify-Gallup Entrepreneurship study are good news for the U.S. economy.  Prior to the Covid pandemic, new business formation had been in decline for four decades.  The decline was cause for considerable alarm, given that repeated research has demonstrated that startups account for an outsized portion of the innovations that drive productivity growth and economic growth, and are responsible for virtually all net new job creation.

Given current circumstances, it might be tempting for policymakers to conclude that American entrepreneurship is healthy again and, therefore, unworthy of their attention.  That would be a mistake.  Rather, the rise in the number of Americans taking the risk to strike out on their own and build something new is an historic opportunity – a call to decisive action.  Now is the time for policymakers to pursue a bold pro-entrepreneurship and -innovation agenda – one that reinforces the recent surge, supports those that have taken the leap, and encourages others to do the same.

A perfect example of how policymakers can affirm and reinforce American entrepreneurship is bipartisan legislation that was introduced into the House of Representatives on June 4th by Reps. Mike Carey (R-OH) and Greg Landsman (D-OH).  The New Opportunities for Business Ownership and Self-Sufficiency (NO BOSS) Act will improve and modernize the nation’s Unemployment Insurance (UI) program by leveraging the power entrepreneurship.  Specifically, the Act will broaden and facilitate participation in the Self-Employment Assistance Program (SEA), a currently underused aspect of the UI program that offers qualifying individuals the opportunity for self-employment by combining income support during periods of unemployment with activities related to starting a business.

The bill is a powerfully pro-innovation and pro-entrepreneurship reform to an important aspect of America’s employment policy apparatus.  Here are three additional steps that policymakers can take to solidify the surge in new business formation and generate new momentum for the U.S. economy:

  • Pass the Tax Relief for American Families and Workers Act of 2024: For nearly 70 years, American businesses have been permitted to deduct from taxable income 100 percent of research and development expenses in the year those expenses were incurred.  This favorable tax treatment promoted innovation and economic growth by powerfully incentivizing critical investments in research and technological advancement.  But when Congress passed the Tax Cuts and Jobs Act in 2017, it changed the tax treatment of R&D to partially off-set the revenue impact of the tax cuts.  Beginning in tax year 2022, businesses must now amortize R&D deductions over five to fifteen years, dramatically increasing businesses’ annual tax liabilities and disincentivizing innovation-promoting investment.  Startups are hit disproportionately by the change, as they tend to invest heavily in developing, testing, and improving their product or service.

On January 16th, Senate Finance Committee Chairman Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO) announced a bipartisan, bicameral tax framework that, among other important provisions, would restore first-year expensing of U.S.- based R&D investments.  The legislation – introduced as the Tax Relief for American Families and Workers Act of 2024 – was passed by the House of Representatives on January 31st by a vote of 357 to 70 with broad bipartisan support.  The Senate should pass the legislation immediately.

  • Pass the Expanding American Entrepreneurship Act: Launching a new business requires money.  Entrepreneurs need money to develop their product or service idea, research the marketplace, develop and implement a strategy for identifying and targeting customers, and, hopefully, begin paying initial employees.  Many new businesses – particularly those that have the potential or intent to grow very quickly – rely on investors who provide early-stage capital in exchange for an equity stake in the company.  In recent years, the overwhelming share of equity capital has gone to entrepreneurs who are white and male.  Women founders receive only about 2 percent of total equity capital, while entrepreneurs of color receive less than 1 percent.

On November 17, 2023, Senators Jerry Moran (R-KS), Tim Scott (R-SC), and Mark Warner (D-VA) introduced the Expanding American Entrepreneurship Act.  The bipartisan legislation would expand parameters of section 3(c)(1) of the Investment Company Act of 1940 to permit emerging investment fund managers to raise larger funds with a higher number of permitted investors – including more accredited women investors and investors of color – diversifying the investor base and thereby directing more equity capital to women founders and entrepreneurs of color.  Similar legislation – the Improving Capital Allocation for Newcomers (ICAN) Act – passed the House on March 8th as part of the Expanding Access to Capital Act.

  • Enact High-Skilled Immigration Reform:  On August 9, 2022, President Biden signed the CHIPS and Science Act into law.  The Act is the most significant innovation-related legislation in decades and is America’s bipartisan game plan to meet the competitive threat from China and win the innovation future.  There’s just one problem – America lacks sufficient numbers of skilled workers to field the team needed to carry out the plan. For example, to staff the chip factories and research labs announced since passage of CHIPS – not counting the many other skilled talent implications of the Act – the United States needs an estimated 30,000 to 50,000 new semiconductor engineers over the next five years, a number far exceeding current graduation rates.

To fulfill the extraordinary promise of the CHIPS and Science Act and secure America’s innovation future, policymakers must act to pass bold skilled workforce development policies – including awarding “graduation green cards” to foreign-born graduates of American universities who want to stay and pass a national security background check, and creating a “Startup Visa” to attract and retain foreign-born entrepreneurs.

The continuing surge in new business applications and the findings of the Shopify-Gallup Entrepreneurship study are great news for America, but should not be an excuse for policy complacency.  Thriving entrepreneurship is essential to America’s economic vitality, but remains a risky undertaking.  A third of new businesses fail by their second year, half by their fifth.  America’s innovators need and deserve a policy environment that maximizes the chances of their success.  Now is the time – with the wind at their backs – for policymakers to make strengthening American entrepreneurship a national priority.

John R. Dearie is the president of the Center for American Entrepreneurship.

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