It may not be fashionable to admit in an era of vast government expansion and profligate spending by both political parties, but taxpayer funded bureaucracies—more often than not—still stifle efficiency, kill innovation and produce poor service.
So it doesn’t come naturally to me to seek out government as a solution to solve problems. But it is essential to recognize that the U.S. faces several intractable challenges that only the government can resolve (even when some of these problems were, in fact, created by the government).
As difficult as it may be, the U.S. business community needs leaders of both parties to put aside their differences—even during campaign season—and remove barriers to success. Here would be four places to start:
• Federalize cybersecurity. The defense of American business has been a bedrock principle of the American government since its founding. Immediately after declaring independence, ships of our new nation were plundered by the Barbary Pirates, who seized our commerce vessels and held sailors for ransom. Lacking a Navy, Congress paid these so-called “tributes,” encouraging more attacks and bigger payments. By 1800, the U.S. was paying an astonishing 20% of annual government revenue to the pirates. Only with the development of the Navy did the U.S. began to fight the pirates; the threat was eliminated only with the French conquest of Algeria in 1830.
Today, we face the same dilemma in cyberattacks, and we are repeating the policies that failed. Ask any CEO who has turned to the FBI after they have been victimized by cybercrime and they will tell you that they received no help whatsoever.
With no other options, individual companies frequently find it in their best interests to pay the demands of today’s cyber criminals (tribute). While that frequently resolves that individual attack, it incentivizes the criminals to continue their attacks on targets new and old, creating an endless, escalating spiral.
The only possible path to defeat this scourge is for collective action on the part of the Feds, which must mobilize the resources and develop the will to unequivocally prosecute and destroy those who attack American commerce via the internet.
In March 2022, President Biden put our adversaries on notice by publicly proclaiming “critical” industries as being “off limits” and on which attacks would be met with the force of the U.S. government. It was a start, but it also gave carte blanche to bad actors to attack every other U.S. industry. The administration should extend Federal protection over the full U.S. economy and fund the effort by reorganizing the FBI to defend U.S. companies from criminals domestic and foreign.
• Simplify contractor/employee definitions. While some employers undoubtedly abuse/misuse contractor classifications to deny benefits to deserving people, today’s laws that classify employees vs. contractors are badly antiquated, open to wide interpretation, and poorly adapted to today’s work environment. To “clarify” this issue, the IRS provides guidance via form SS-8, which requires 44 answers to questions, about half of which are open-ended and most provide no insights on how to properly classify people. (e.g., “What types of reports are required from the worker? Attach examples.”)
App-enabled “gig” work has stolen the headlines, with state lawmakers driving policy changes using Uber as their target. But most employers are not Uber. Tens of thousands of businesses contract with professionals on a variety of mutually-beneficial contracting relationships. These flexible work environments benefit both workers and companies; in many cases, such arrangements enable those caring for young children or elderly relatives to re-enter the workforce when a formal employee-employer relationship might not otherwise work.
Instead of presuming that every contractor should be an employee or making it difficult to maintain contracting relationships, as some states do, wouldn’t a better policy be to ask both contractor and employer each year to voluntarily renew (or not) their contracting relationship? Should the contractor feel that the relationship has changed to an employee-employer relationship, both parties should have the opportunity to choose to change that status, rather than it being forced on both.
• Harmonize cross-state commerce laws. In 2018, the U.S. Supreme Court handed down a decision in South Dakota vs. Wayfair, which allowed each state to require any business that sells within its borders to collect and remit sales tax even if the business has no physical presence in that state. Every U.S. business with cross-border sales must now track the changing rules and thresholds in all 50 states, and file reports and remit payments to states in which it crosses each state’s different thresholds. Pennsylvania, for example, has a $500,000 annual revenue receipts threshold, while Maryland has a $200,000 or 200 transaction threshold.
Keep in mind that most state rules are retroactive, so a small business with, say, 190 sales in Maryland wouldn’t need to collect nor remit sales tax to the state; but as soon as it made its 200th sale, it would be responsible for sales tax from dollar #1. It’s not clear how that company would go back and collect sales tax from the prior 199 customers (large companies would, of course, presume they meet the threshold in every state and always collect tax).
For small and medium businesses, these rules are burdensome to small accounting staffs, overly complex and unfair. Congress should act and implement an annual revenue minimum to free small and mid-sized businesses from this patchwork of state laws. Or they should negotiate a standard cross-state tax rate for tracking and remittances.
Negotiate an immigration policy. The U.S. faces severe labor shortages which are crippling multiple industries including agriculture, manufacturing, hospitality, food service and healthcare. At the same time, a lack of border security threatens the welfare and safety of border states. All this leaves CEOs in the lurch, unable to meet market demands for goods and services and plan for the future.
The U.S. Congress needs to secure our borders and implement a working immigration policy that enables work-willing immigrants who share our values and are vetted for security and health concerns to legally enter and work in this country. Skilled professionals, including engineers and scientists, should similarly be vetted and welcomed to this country to continue our proud tradition of attracting innovators to our shores.
None of these issues are simple, of course. But they’re not unsolvable, either. Even in Washington.