Merchants Blame Taxes as Small Business Optimism Dips

The most taxing problem facing America’s small businesses? Taxes.

That’s according to the latest findings from the National Federation of Independent Business (NFIB) optimism index, released Tuesday (July 8). The organization’s monthly report showed a slight dip, dropping 0.2 of a point to 98.6, hovering just above the 51-year average of 98.

“Small business optimism remained steady in June while uncertainty fell,” said NFIB Chief Economist Bill Dunkelberg. “Taxes remain the top issue on Main Street, but many others are still concerned about labor quality and high labor costs.”

According to the report, 19% of small business owners identified taxes as their most pressing issue, up one point from May and ranking as the top problem once again. It was the first time in four years taxes reached 19%, the NFIB said.

The report also found that a net negative 5% (seasonally adjusted) of business owners see inventory stocks as “too low” in June, down 6 points from May.

“This signals a net increase in inventories, with 7% reporting inventories ‘too low’ in June compared to 8% in May,” the federation said. “Twelve percent reported current inventories ‘too high’ in June compared to 7% in May. This component contributed the most to the Optimism Index’s decline.”

Meanwhile, the net percent of owners anticipating better business conditions fell 3 points from May to a seasonally adjusted net 22% (seasonally adjusted). This is still a positive reading, historically speaking, with the 51-year average at a net 3%, the NFBI said.

The report also showed the net percent of owners expecting higher real sales volumes declining three points since May to a net 7% (seasonally adjusted).

Research by PYMNTS Intelligence has shown a geographic divide in optimism among small and medium-sized businesses.

“SMBs operating in major urban centers generally expressed little reason for concern for their future, often reporting steady growth and increased profits,” PYMNTS wrote recently. “In contrast, their counterparts in small towns, suburbs and rural areas harbored increasing anxieties about long-term growth and survival.”

Several factors fueled those worries, such as workers shifting back to urban offices, leading to a reduced customer base for rural SMBs. Beyond that, these businesses said they were concerned about wider economic issues, and about accessing financing.

Additional research by PYMNTS Intelligence underscores the fragile position many SMBs find themselves in, with half of these businesses saying they rely entirely on their day-to-day sales or existing bank balances to stay afloat.