Small Business

Main Street Relieved After 'Cliff' Deal, But No Celebrations

Small business owner
Alija | Agency Collection | Getty Images

As the House approved a Senate bill to avert a so-called "fiscal cliff," most of Main Street was spared tax hikes—good news for small-business owners. The measure allows taxes to rise on household income exceeding $400,000 for individuals and $450,000 for couples, a level not many small entrepreneurs reach.

But Main Street isn't exactly celebrating.

Critical issues that impact business owners remain unresolved. After months of deadlock that left small companies in flux about key hiring and spending decisions, reaction from Mom-and-Pops is muted, despite some of the positives.

Charlie Arnold has been running a power-washing business in Lewes, Delaware for 13 years. Uncertainty about the economy and a debt deal have spooked his customers during the past few months, he told late last year. In his view the fiscal cliff vote hasn't changed much. "I am not sure they really did anything except tell people their individual taxes won't go up," said Arnold this week.

(Read more: Amid 'Fiscal Cliff' Stalemate, Main Street Deteriorates)

"The mystery of what their tax rates will be is finally over, and there is relief in that," said Dan Danner, president and chief executive of the National Federation of Independent Business. That clarity will help entrepreneurs plan and make cash-flow decisions. "But there is much more work to be done to address spending and out-of-control deficits," he said.

"It's hugely disappointing to the small-business community that the legislative bridge to avert the 'cliff' did not address our country's most pressing economic issue: unchecked spending that leads to crushing deficits and debt. Small-business owners need to balance their books to stay in business and they think the federal government should do the same–no more excuses," NFIB's Danner said in a statement.

(Read more: Main Street 2012: The Year of Living With Uncertainty)

Reseach and Development Tax Credit

There is some good news, though. The Research and Development (R&D) tax credit, the most important tax credit for small- and medium-business owners, was extended through 2013 and made retroactive for 2012, though lawmakers stopped short of making it permanent.

"Overall it's a mixed bag but not a permanent solution," said Barry Moltz, a small-business consultant and author.

Kick Can Down the Road

A permanent solution to many small-business issues is precisely what many on Main Street have been hoping for. "By kicking the can down the road, [the settlement] really has not helped my business," said Arnold. "People still have an overwhelming sense of uncertainty about their income and what the government is going to do next to impact them."

Arnold's anxiety about the future seems to be shared among many small-business owners. Optimism among small companies in November, the latest data month available, tumbled, according to the NFIB. Their small business optimism index reading of 87.5 last month is the 10th lowest in the survey's 37-year history. (Read more: )

The deal made in Congress isn't likely to buck up beleaguered businessmen like Arnold. "I hope I am wrong but I don't see it doing much good at this point," he said.