Making it easier for small businesses to save and prepare for the next crisis

It is safe to say that few facets of the American way of life have been left untouched by the social and economic effects of COVID-19. This is notably true for small businesses across the country, which have had to fight tooth and nail to keep their doors open, shelves stocked and the families that depend on them paid and insured. Many of these businesses are family-run mom-and-pop restaurants and shops that have been community staples for decades.

In addition to COVID-19’s threat to these businesses, natural disasters like the hurricanes Texas is prone to pose significant issues for small businesses in their wake. Rebuilding is time-consuming and costly, and coupled with the coronavirus pandemic’s disastrous economic impact, it can all be too great a financial burden for these companies to recover from — causing a lifetime’s work to be lost and families left looking for livelihood.

Small businesses are the backbone of our nation and a key component of the American Dream of being able to take a risk, work hard and determine one’s outcomes in life. And as we take stock of the lessons to be learned and look ahead to a new year, we should look now for ways to help businesses be better prepared to weather the next crisis.

Currently, businesses in our country operate under a tax code that actually discourages saving. If a small business with $10,000 extra at the end of a fiscal year knows a large chunk of that will melt in taxes if it is “saved,” they are understandably more likely to find something else to do with that money. This system disincentivizes saving and makes preparing for crises like COVID-19 or Hurricane Harvey near impossible.

With these challenges in mind, I introduced the Small Business Emergency Savings Account Act in October to help American businesses better prepare for the future and develop a built-in resiliency to deal with unexpected crises. If passed, this bill will allow small businesses to start tax-free emergency savings accounts. These accounts can be used to cover qualified emergency expenses when public health crises or natural disasters strike.

Under my plan, small businesses throughout the country will be able to save up to 25 percent of their payroll expenses tax free in an emergency savings accounts. In a similar way as the Paycheck Protection Program, small businesses will be able to use those funds to cover wages, rent, health care and utilities for their employees when faced with national public health challenges or natural disasters.

The goal here, besides doing all we can to keep our nation’s small businesses strong, is to encourage and build a culture of saving in our country by making it easier to be financially prepared. Not only would preparing through saving help participating businesses, it is also a more responsible approach for our posterity and for the health of the American economy.

Our nation is currently crippled by debt, yet our so-called solution has continued to call for more spending — trillions more. This kind of so-called help, when unchecked and unlimited, is reckless and disingenuous, especially when considering that it is our children who will inherit the bill. And we cannot continue to think that addressing the challenges faced by our generation by limiting the ability for future generations to do the same is a moral or sustainable approach.

Our job as public officials is to do our best to protect the unrivaled American Experiment. We should work toward policies that reward and incentivize responsibility and preparedness. And we should take up the challenge of each generation of Americans to pass on to our posterity a free and prosperous nation. I am hopeful that Congress will do right by American small businesses and work to rebuild our economy through a culture of saving by passing the Small Business Emergency Savings Account Act.

Cloud represents the 27th District of Texas.