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Small Business/Retail Alan Greenspan’s support of tax cuts a boon to small biz



Small Firms Would Be Biggest Benefactors of Tort Reform Legislation

Alan Greenspan’s support for tax relief will help small businesses survive the challenges of the new economy.

So said Karen Kerrigan, chairwoman of the Small Business Survival Committee, a Washington, D.C.-based business advocacy group.

Kerrigan pointed out the Federal Reserve chairman has not changed his position on debt reduction and tax cuts, but simply conceded that the federal government can effect both debt reduction and substantial tax relief.

“Alan Greenspan always has stated that tax cuts are preferable to keeping the budget surplus in Washington where it will be spent lavishly by politicians,” she said. “In fact, Greenspan specifically pointed out that recent spending increases by the federal government have been ‘troubling.'”

Cutting marginal tax rates and marginal income tax rates helps increase economic efficiency and increases incentives for saving, investment, and work. These also broadly boost incentives for risk taking, and therefore benefit the overall economy, added SBSC chief economist Raymond J. Keating.

Keating noted that the greatest benefit to the economy would come from reductions in income, capital gains and death taxes, and looks forward to the forthcoming tax proposals from the Bush administration.

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No, Not A Cake: Torts have long sent a chill down the spines of small-business owners and threatened to push them into insolvency. Even the threat alone ends up costing small businesses.

On average, a third of all small-business owners are sued and more than half have been threatened with a lawsuit. In litigious California the numbers are higher, said Martyn Hopper, California director for the National Federation of Independent Business, a Washington, D.C.-based business advocacy group.

The need for tort reform is clear. A typical small-business owner might make $40,000 a year, but end up spending $100,000 defending himself in court against just one lawsuit. The small-business owner will pay something even if he or she never enters the courtroom, either through an out-of-court settlement or through higher liability insurance premiums , or both, he said.

This is the case even for the most frivolous and silly lawsuits, Hopper said.

Out-of-court settlements are a rich revenue stream for lawyers. Since most small-business owners can’t afford a court hearing, lawyers can press defendants to settle, no matter how little merit the case may have, he said.

But that’s small change next to punitive-damage awards in trial cases. Attorneys have been winning outlandish punitive-damage awards at the expense of small-business solvency. That money doesn’t go to the party that brings the suit, but instead to the lawyers.

The abuse of the principle behind punitive-damage awards has alarmed lawmakers from both parties , both in Washington and Sacramento , to push for tort reform, Hopper said.

The only thing tort reform would do is rein in punitive damages and “joint and several liability,” which allows attorneys to hone in on either the richest defendant or the one with insurance. As it turns out a defendant who is only 1 percent at fault may be stuck paying 100 percent of the damages, he said.

A proposal now being discussed among Sacramento lawmakers would cap , not eliminate , punitive damages against small businesses at three times the price of compensatory damages (economic and non-economic damages), Hopper said.

Hopper pointed out that there are 2.1 million full-time businesses in the Golden State, 92 percent of which either have no employees or fewer than 10 employees.

Since small business is California’s largest employer and biggest revenue producer, it must be able to depend on a balanced and fair justice system if the economy as a whole is expected to thrive, he said.

Stamp-Ede To The Top: San Diego-based Mail Boxes Etc. has been named as the No. 2 franchiser on Entrepreneur magazine’s 2001 “Franchise 500.”

MBE ranked between No. 1 Subway and No. 3 McDonalds. The ranking is up from a seventh-place finish in 2000, said Kristin Scheithauer, a spokeswoman for MBE.

The rankings were based on financial strength and stability, growth rate, and size of the system. In the past year MBE added 432 locations around the world, bringing the total size of its franchise network to more than 4,300 locations, Scheithauer said.

That makes it one of the fastest-growing business opportunities today. In addition to the overall rankings, MBE placed seventh on the list of fastest-growing franchises, she said.

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Luv You, Be Mine, Stay Healthy: For most people, Valentine’s Day brings up images of cute messages stamped on little pink hearts.

But Viejas Outlet Center is putting a new twist on the popular holiday by spreading a serious message about hearts and heart disease.

The outlet center is joining the Heart Failure Society of America and UCSD Cardiomypathy Program in a community outreach effort to offer free blood pressure, blood sugar and cholesterol screenings.

The screenings, from 11 a.m. to 3 p.m. Feb. 13, are part of “National Heart Failure Awareness Week,” according to information posted at the Viejas Web site, (www.viejas.com/voc).

As an added bonus, people who participate in the screenings will get special discounts at Viejas Outlet stores. The discounts are available to screening participants only.

Send small business and retail news to Zion at lzion@sdbj.com.

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