Going into 2013 could have been a lot different for many. The fiscal cliff situation came from the expiration of the Bush Tax Cuts from 2001 and the planned spending cuts of the Budget Control Act of 2011. Without Congress passing a new budget, taxes would automatically increase $600 billion across the country. The effect of 2012 holiday retail sales were very significant as customers had concerns about their future finances. According to Jack Kleinhenz, the NRF Chief Economist, 2013 retail sales increase of 2% to 2.5% would have stayed flat for the year if the fiscal cliff was not avoided. A deal was eventually reached when Congress was able to avoid tax increases for most families and push the spending cut decision into March.
According to a 1992 Supreme Court ruling, internet retailers do not have to collect sales tax on merchandise sold to customers in a state where the retailer does not have a physical location. The Marketplace and Internet Tax Fairness Act would charge all internet retailers sales tax for sales in any of the states that charge a sales tax. The legislation passed in the Senate on May 6, 2013 but has stagnated since then. According to the New York Times, an estimated $22 to $24 billion goes uncollected from internet retailers each year. Ultimately this bill would help level the playing field between big internet retailers and small businesses who compete with the concept of showrooming. Showrooming is when a customer goes to a local business to view and engage with an item, but then places the order online where sales tax is not collected. If the Marketplace and Internet Tax Fairness Act does not get passed in the House of Representatives before January 2015, the bill considered dead and will have to pass back through the Senate.
In July 2013, U.S. District Court Judge Richard Leon ruled that the $0.21 cap, set by the Federal Reserve, on debit card swipe fees was much higher than the amount expected from Congress. According to the National Retail Federation, retailers could expect to save $8.5 billion a year, but up to $12.5 billion could be saved under the right fee structure. The Dodd-Frank bill set the debit card cap, but failed to do anything about credit card swipe fees. The NRF says that swipe fees cost the average consumer about $400 per year and continued to say that swipe fees are the second or third largest cost impact to small business owners.
The government roll out of the Affordable Care Act (ACA) in October 2013 was tumultuous at best. Individuals found the exchanges difficult to navigate and highly unreliable. Beyond the execution, the ACA has put the squeeze on small business employers as many issues have arose. One such issue is how the ACA defines a full-time worker as someone who works 30 hours a week, instead of the standard 40. By not keeping it at the standard, business owners will be forced to pay more in healthcare costs or possibly lay off workers. The House of Representatives passed legislation in April that would set the full-time hours at 40, but the bill is currently stalled in the Senate and will most likely not be addressed until after midterm elections. Under the current ACA laws, businesses will be required to provide insurance to full-time workers as early as 2015.
Arguably one of the most important and impactful positions in the world, President Obama nominated Janet Yellen to take over as the Fed Chairman from the retiring Ben Bernanke. With strict controls over Quantitative Easing and inflation, Janet Yellen is looking to put the consumer back in the spotlight. Consumer spending has been tepid in the last few years and Yellen is monitoring wage growth and unemployment levels as a significant indicators that the economy is healthy and favorable again.
In the height of the 2013 holiday season, Target unveiled that they had been the victim of a three week long data breach affecting upwards of 110 million customers, 40 million of which had payment card information stolen. Target took a big hit in customer loyalty as Attorney General Eric Holder started looking into the matter. According to a Bloomberg article, sales for their fourth quarter were down 46% year-over-year and about $61 million has been spent as of February 1st in order to start setting matters straight. In February, Target announced they would be spending $100 million for registers that read EMV cards.
In the 2014 edition of President Barack Obama's State of the Union, he called for changes to many different things. One thing that sure stuck out in retailer's minds was the proposal of a minimum wage increase to $10.10 an hour. Shortly after the speech, the Congressional Budget Office released a report stating that raising the minimum wage to $10.10 an hour would raise 900,000 individuals out of poverty, but we would also loose about 500,000 to 1,000,000 jobs in the process. Since then, the minimum wage debate has stalled out in Congress and become more of a state by state issue.
One of the biggest threats to America's small businesses are patent trolls. These are groups of people who find older patents and then go after businesses for using that technology. For a small business, it is much easier to settle the case rather than fighting it out expensively in court. On May 21, 2014, Senator Patrick J. Leahy removed the bill from the Senate Judiciary Committee's agenda. This move means that patent reform will most likely not come up again in Congress until at least 2015. According to an article in the New York Times, Vermont Governor Peter Shumlin signed legislation in May that allows the state's attorney general to sue certain patent holders who go after businesses in Vermont. As the only state with these kinds of laws, Vermont will surely be the center of attention for patent reform.
The weeks leading up to July 1, 2014 were filled with heated debates between the International Longshore and Warehouse Union and the Pacific Maritime Association. At midnight on the night before, their contract was set to expire and the cargo boats at the ports along the West Coast may have to be kept waiting. Although there wasn't an agreement made between the two groups, workers agreed to keep working under existing contracts for the sake of the economy. In 2002 when negotiations stalled, the PMA locked out their workers for ten days as they racked up about $1 billion in losses. As of today, there is still not a contract agreement, but a limited amount of workers are still working. Should a strike still happen this year, Women's Wear Daily quotes that $2.5 billion a day would be lost and holiday stock would be stuck in waiting at the ports. Nothing was solved in 2002 until a federal court order ended the ten day lockout.
From August 4th through the 6th, President Obama and other US leaders met with a large delegation of African leaders to discuss the growth and future business opportunities that Africa possesses. During the three day summit, the African Growth and Opportunity Act (AGOA) was renewed and a lot of other subsidies were placed into the African markets in order to promote growth throughout the continent. Sourcing in Africa will be a rather large topic for the next few years as groundwork is laid out in order to make it a more viable option.
Under the United State's current corporate tax structure, it is very beneficial to seek an offshore headquarters in order to lower your tax bill. Many companies this past year have merged with other companies and then moved their headquarters overseas for a lower tax bill in a move called inversion. On the 23rd of September, Treasury Secretary Jacob Lew reviewed the current laws and outlined some new rules that would make inversion a lot less valuable to an American company. With inversion no longer an option for companies, we can expect to see a bigger push for corporate tax reform in the future.
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