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Small Businesses Already Slipping Off The 'cliff'

The prospect of consumers spending less troubles Greg Jones. The owner of three Five Guys Burgers and Fries franchises in Florida is concerned that customers who might normally stop in three times a week will cut that back to once. Restaurants like his lost business to cheaper options like McDonald's during the recession. He's worried that will happen again. Jones wants to open two more Five Guys locations, but says he might not be able to if the country goes over the cliff. If his existing restaurants aren't profitable enough, he won't get the money he needs to expand.

The consequences that Jones faces are a big part of why Georgia Institute of Technology professor Thomas Boston says he thinks the fiscal cliff could do enough damage to small businesses to halt the economic recovery.

"They're just now recovering, really growing in any kind of significant way since the recession," Boston says. "The job creation we've seen over the last five months, that creation has been located overwhelmingly in small businesses."

The stalemate in Washington has kept Arthur Cooper from making big decisions about his Randolph, N.J. Internet marketing company, Optimum7.

"I have to be more defensive in my posture â¿¿ I have to hire only based on new business that's already coming in," he says. "I can't plan on news business that might happen."

Like many small business owners, one of Cooper's concerns is the scheduled increase in personal tax rates. He reports his business income on his personal Form 1040 tax return. The scheduled tax increases could result in a much higher tax bill.

"Let's say I'm going to have to pay $30,000 more for next year in terms of taxes than I did this year," Cooper says. "What impacts me personally impacts my business."

Cooper expects Congress to do what it has done many times in the past â¿¿ come up with a stopgap measure and defer significant decisions until six months or more into the future. That would keep him in limbo while he waits to see if lawmakers will eventually agree on taxes and a budget. He's angry about what's happening in Washington.

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