The COVID-19 pandemic poses an existential threat to small businesses, with more than 400,000 lost since the crisis began. Many small businesses are financially fragile and not equipped to weather a prolonged period of substantially reduced revenues. Further widespread business failures would destroy jobs and firm-specific capital, and hamstring the recovery. The main existing source of support, the Paycheck Protection Program, has had mixed success, and is not well suited to what now looks to be a prolonged contraction.
In addition to economy-wide measures to solve the public health crisis and spur economic stimulus, Steven Hamilton proposes a set of targeted proposals to support small businesses, both now and in the future. Specifically, the proposal would:
- Significantly expand the Employee Retention Credit (ERC) to help cover small businesses’ payroll costs.
- Introduce a new Small Business Survival Credit (SBSC) to help cover small businesses’ fixed costs.
- Invest in the capabilities of the IRS so it may better support small businesses in future crises.