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For over three years, small businesses have faced compounding crises. From the initial COVID shock to ongoing repercussions involving the labor market and supply chains, the competitive landscape for these businesses has been a whirlwind.

On top of these factors, small companies face broader changes like global trade, rapid technological innovation, and an economy that is increasingly concentrated in the hands of fewer and fewer large corporations.

Over the past two years, however, we have seen unprecedented growth in small business start-up activity. In 2021 and 2022, over 10 million people filed applications to start new businesses, and small firms are almost entirely responsible for the strong labor market we see today.

In an economic landscape in which the only constant is change, it is our job as policymakers to give these firms some semblance of stability. By making policy decisions that allow small businesses to gain their footing, we can enable their success by creating the ability to plan long-term and have confidence in their decision-making.

Unfortunately, the policy environment is far from a sure thing. Right now, we are facing several changes to tax policy that undermine small business competitiveness and the potential for financial market instability as we saw with Silicon Valley and Signature Banks. To create more certainty, it is time we take stock and explore how we can stabilize this landscape for small businesses.

Let me start by discussing the lending environment. Over the past two years, we have seen the quickest rise in interest rates in our nation’s history to combat ongoing inflation. While this has helped stabilize prices, it has pushed the cost of capital for business investment out of reach for many Main Street business owners.

With the prime rate of over 8 percent, and small business loan rates upwards of 15 percent, the ability to deduct interest expenses is more important than ever.
And while many of the smallest businesses are exempt from the deduction’s limitation, many companies within the small business size standards still face a substantial limit on their deduction.

I would be happy to work with my colleagues to ensure our small businesses have tax policies that reflect how they operate. However, tax relief for businesses should be paired with tax relief for workers and families. That’s why we should also consider extending the expanded Child Tax Credit, which managed to cut child poverty in half.

Earlier this year, we witnessed several bank failures. This put the deposits of many small businesses in harm’s way. And while in the end, these businesses were made whole, we must evaluate the causes of those failures so these events do not transpire in the future.

In 2008, during the Global Financial Crisis, we also saw the catastrophic consequences of limited regulatory oversight, as it wreaked havoc on our small business community, set our economy back years, and had an acute impact on the most vulnerable among us.

As a result, new regulations were proposed to fortify the financial system to work during good – and bad – economic times.
Above all, it is crucial that we improve the resilience and stability of the financial system on behalf of small businesses. Doing so increases the competitive landscape for our main street businesses and allows them to do what they do best – create jobs and invest in our local communities.

I thank all the witnesses for joining us today and look forward to a productive discussion.