The Presidential Election: What's At Stake For Solution Providers4:00 PM EST Fri. Nov. 02, 2012
For Mark Galyardt, a top executive for the fastest-growing solution provider of 2012, the stakes in the presidential race couldn't be higher for small businesses like his own.
"We cannot as small businesses tolerate this environment of hostility coming from Washington that has been emanating from the current administration," said Galyardt, executive vice president of Xioss, an Atlanta storage solution provider that was No. 1 on CRN's 2012 Fast Growth list. "We need a change to be able to move this economy forward."
Galyardt is one of many solution providers supporting Republican presidential candidate Mitt Romney in the hopes that the change in leadership in Washington will dramatically improve the economic environment for small businesses. In fact, a majority of solution providers surveyed by CRN say they will vote for the former Massachusetts governor in the election Nov. 6 (see Tuesday's edition of the CRN Tech News app for a full look at the exclusive research).
Whether they are Romney supporters or backers of President Obama, solution providers across the country say the outcome of the election will impact everything from tax rates hitting small businesses to health care costs, which are on the rise and are taking their toll on the bottom line.
Galyardt sees both his tax rates and health-care costs rising if Obama is re-elected. "The health-care costs for our company, which is on a group plan, have gone up 30 percent from last year. And that is without even full implementation of Obamacare, which should be called the Obama tax because that is what it is. That is killing small businesses."
Galyardt sees a Romney victory freeing up cash that can be used to grow his business. A Romney win is "going to free up more capital that we are not going to have to be sending to Washington, D.C.," he said. "We can use that to hire more talented resources. We're looking for 'A' players in sales and technical. That is our differentiation. Those guys don't come on the cheap. And we don't want to hire on the cheap. We want to hire the best people we can. Today a big chunk is coming out of our bottom line just to cover the employees we have."
Romney has pledged to eliminate the landmark Obama health-care reform legislation with an executive order if he is elected president. That is a critical issue for solution providers supporting Obama's re-election. They insist that the president's leadership on health-care reform has reined in out-of-control health-care costs.
"One of the biggest changes [with Obama] I was excited about was health-care reform," said Christopher Hertz, CEO of New Signature, a fast-growing, cloud-computing solution provider headquartered in Washington, D.C. Hertz is voting for Obama. "That was a huge cost driver in our business until the passage of health-care reform. We had the statutory maximum increase in health-care costs every year until this year. The fact that Obama and Congress passed health-care reform, regardless of whether it is perfect or not, is a huge benefit to businesses."
Hertz is flabbergasted that anyone would want to repeal the health-care legislation given the massive increases that businesses were facing before the passage of the law. "Can we refine it?" asked Hertz. "Absolutely. But come on; that is the single most important thing Obama did to help our business. Our health-care costs in 2009 were massive. It was getting to the point where we almost couldn't survive. Health care was one of the biggest drags on our economy. Don't come to me and tell me you are going to repeal health-care reform. That is just ridiculous."
"As I grow my business, I have to supply my employees with health care to be competitive and to be a good business," he continued. "The soaring health-care costs were keeping me up at night. At least now there is something happening with health-care reform. It is frustrating to have Romney wanting to trash it. If a big part of your campaign is committed to gutting one of the most meaningful pieces of legislation that has happened in the last decade, I am not going to support that."
The differences between Romney and Obama on taxes also divide technology solution providers. Romney has pledged to make the Bush-era tax cuts permanent and cut rates on ordinary income by 20 percent. What's more, Romney has promised to reduce the highest tax rate from 35 percent to 28 percent.
Obama, meanwhile, has proposed that the top tax rates for those individuals making $200,000 or more and couples making $250,000 or more revert to 36 percent and 39.6 percent. Many technology solution providers formed as limited liability corporations would face higher taxes if President Obama is re-elected, said Scott Goemmel, who sold his solution provider business PMV Technologies in 2011 and now is a business adviser for technology solution providers at 4 Profit, a South Salem, N.Y., solution provider adviser. LLC owners generally are taxed at the individual tax rate rather than the corporate rate.
"I'm a Romney fan and a Republican at heart," said Goemmel. "We need a more business-friendly climate. From a business standpoint, I think less taxes for a lot of these small LLCs is a good thing. I'm a firm believer in less government."
Galyardt, for his part, is frustrated by what he sees as a president who is insensitive to the pressures facing small businesses. "I don't know who anointed certain people that think they know better than small-business owners or individuals on how they should spend their hard-earned money," he said. "But, unfortunately, we have politicians who think we need to just send it to them and they'll figure out what to do with it. That has got us a $16 trillion debt that is not going to be good for my children, their children, and it certainly is a hostile environment for small business."
John Ross, a technology consultant based in Dover, N.H., said that one of the overlooked consequences of the election is the impact on the rate of IT innovation. He maintains that a Romney victory and the influx of cash that will come from a Romney tax cut will lead to big improvements in IT innovation, while an Obama administration will be more focused on government programs that will have little impact on the rate of IT innovation.
"There is going to be more technology innovation with a Romney administration," he said. "The Democrats, in general, are great at social programs and I support a lot of what they do. The problem from an IT perspective is those programs are being implemented by people who have been doing things the same way for 20 years and don't know how to do things differently."
PUBLISHED NOV. 5, 2012