Small businesses feel COVID strain
For furniture store owner Chris Pfeiffer, the COVID-19 pandemic is like starting over.
He watched as the coronavirus spread around the world and, like any good business person, he considered how it would affect his customers. He tore up his 2020 business plan, slashed revenue expectations by 40 percent, and assumed his shop would do no better than when he first opened nine years ago.
“We’re starting from scratch,” said Pfeiffer, managing partner of Homestead House Furniture. “We’re seeing less people, but the ones that do come in are pretty serious, a more focused buyer.”
Most of Homestead’s current customers are new homebuyers who need a lot of furniture, something Pfeiffer said he anticipated. He’s seen a drop in older walk-in customers looking to refresh their living rooms.
Pfeiffer has been conscientiously cutting operating
expenses at his Conroe store to balance the books. Every little bit helps.
“Our lights are turned off all day until a customer comes in, then we scurry around, turning on lights and talking to them,” he said. Homestead House is not sponsoring the local Little League team or making donations to community projects. But even these steps may not be enough as the pandemic drags on.
The United States has comprehensively failed the coronavirus challenge. Our political leaders did not take the threat seriously, our attempts to slow the spread were puny, and months after we identified what needs to be done, the nation still does not have enough tests, contact tracers or personal protective equipment.
Economic aid, meanwhile, has overwhelming favored big corporations, giving them the strength to wait out the recession while small- and medium-sized businesses sink into bankruptcy.
The Federal Reserve’s bond-buying program has allowed big companies to issue billions in bonds to survive the downturn. Small- and medium-sized companies, meanwhile, have relied primarily on the Payroll Protection Program, which mostly went to employees. The program has not been as successful, efficient or as even-handed as many had hoped.
Analysts at S&P Global, the financial data firm, found that only 42 percent of PPP money went to service industries that suffered 66 percent of the job losses. Seven of the 10 states that received the least amount of money were among those with the highest unemployment.
“Very little of the increased spending (from PPP) flowed to businesses most affected by the COVID-19 shock,” according to a preliminary report by the nonprofit National Bureau of Economic Research. “Paycheck Protection Program loans have also had little impact on employment at small businesses.”
Banks failed to help 95 percent of minority- and women-owned businesses in obtaining PPP loans, though they were hit the hardest, NBER added in another paper.
Congress changed the rules midstream by allowing companies to take longer to spend PPP money on employees. That revision came too late for Pfeiffer, who spent his loan on staff salaries before the previous
June 30 deadline. He has little cushion as the recession continues.
National Federation of Independent Business, which represents small businesses, reports more than half of its members have already spent their
PPP money, and 22 percent anticipate laying off staff soon.
As local leaders call for new stay-at-home orders that would shutter retailers, small-business owners like Pfeiffer are crying for help.
For years, Pfeiffer has called on Texas to collect sales tax from out-of-state online retailers. Texas Comptroller Glenn Hegar finally required e-commerce sites to collect sales tax in 2018, but only if they sell more than $500,000 worth of goods into the state every year.
To give local companies like Homestead House a chance, Pfeiffer argues all online sellers should remit sales tax no matter how much they sell. When he looks at small e-commerce sites that sell products similar to his, he finds they don’t collect the tax.
“We have better prices, I just want to be able to compete without sales tax being the issue,” he explained.
If Hegar eliminated the $500,000 exemption from sales tax collection, the state could make up for revenues lost due to the recession. It would also make local businesses — which pay property and sales taxes — more competitive.
The Coronavirus Recession is really just beginning to have an impact on the economy. If governments want to soften the blow, they will need to come up with new, more effective aid programs, especially for small businesses. They need to revise old tax policies for a new post-COVID world to avoid a Coronavirus Depression.
Pfeiffer did mention one bright spot, though. He’s doing a roaring business in home office furniture.