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As U.S. employers struggle to provide employee health insurance benefits, a new report confirms the cost of health insurance remains the No. 1 chronic issue for small business owners.

Federal and state taxes on business income and burdensome government regulations also are Top 10 challenges listed in the 2024 report released last week by the National Federation of Independent Business. Interest rates top the list of problems that are increasing in importance since the 2020 report.

The Small Business Problems and Priorities report is issued every four years by the NFIB Research Center. Business owners have reported the cost of health insurance is their biggest problem consistently since 1986.

“We really can’t afford that,” said Maura Baker, co-owner of Zero Tolerance Coffee and Chocolate, 919 W. Britton Rd. “There are eight of us.”

Baker, who opened the shop in 2019 with her husband, said the cost of complying with layers of regulations and licensing on top of taxes leaves nothing left to buy health insurance.

“The government and tax costs are overwhelming,” she said. “It’s a lot of money just to be in business.”

If property and payroll taxes, business and health department licenses, workers compensation costs and building insurance weren’t enough, inflation has pushed profits to a very thin margin, Baker said.

“The cost of green coffee doubled but I can’t charge double,” she said.

The State Chamber of Oklahoma is in the process of launching a small business insurance program called ChamberCare for local chambers and their members with 2 to 50 employees, President and CEO Chad Warmington said this week.

“Being a small business ourselves (20 employees), we struggle with the same thing,” Warmington said. “It’s just such a big cost-driver.”

The self-funded healthcare option is administered by Allied, utilizing the Aetna network, and is registered with the Oklahoma Department of Insurance.

“We’ve been working on it for four years and the need has grown each year,” Warmington said.

Regulation and taxation

Oklahoma regulations and licenses are also top-of-mind issues for the chamber, which constantly asks, “Are we over-regulating these small businesses,” Warmington said, adding it’s a challenge to keep regulations and taxes down while still generating enough money to provide the businesses what they need.

He said two recent successes are the 2022 state law enabling commercial businesses to write off the full cost of equipment as a state tax deduction and the 2024 law repealing Oklahoma’s franchise tax. Calculated on the assets a business owns – not the net profit it makes – businesses had to pay the franchise tax regardless if they turned a profit that year.

NFIB State Director Jerrod Shouse urged lawmakers to use the new report to better understand the challenges for small businesses and stop “the threat of a massive tax hike in 2025.”

“Historic inflation has taken a toll on small businesses both here in Oklahoma and across the country. This report underscores the challenges our small business owners face and should serve as a roadmap for state legislators on how to best support Main Street Oklahomans,” Shouse said.

“The threat of a massive tax hike in 2025 exacerbates small business owners’ uncertainty. On the federal level, its incumbent lawmakers make the 20% Small Business Deduction permanent.”

The 20% Small Business Deduction was created in the 2017 tax law to bring small businesses’ tax rates closer to that of their large, corporate competitors. It allows small businesses to deduct up to 20% of their qualified business income, which owners use to invest in their employees and plan for future business operations.

The State Chamber’s top worry for small businesses is State Question 832, Warmington said.

If approved by voters, SQ 832 would gradually increase Oklahoma’s minimum wage to $15 an hour by 2029 and would require adjustments as needed to meet the rising costs of living.

Warmington said the concern is that the automatic adjustment tied to nationwide inflation could easily push the state’s minimum wage to $20 per hour and higher.

“That would crush small businesses,” he said.

Survey methodological

The survey on which Problems and Priorities is based was conducted from February through mid-April across a randomly drawn sample of 40,000 members of the National Federation of Independent Business. Sampled small business owner members received a four-page mail questionnaire and up to two follow-ups. They provided 2,873 usable responses by the April cut-off date.