The United States is facing a looming financial precipice at the end of the year, when an assortment of Bush-era tax cuts expire, automatic spending decreases kick in and other provisions come to an end—including the U.S. payroll tax legislation that reduced the payroll tax rate from 6.2 percent to 4.2. percent. The quandary, referred to as the "fiscal cliff," is being regarded with trepidation by lawmakers and members of the public alike, and the increased media attention in the wake of the presidential election is serving to exacerbate these worries.

A recent opinion poll conducted by Greenberg Quinlan Rosner Research for Small Business Majority found that small business owners are concerned as well. Specifically, nearly eight in 10 of the 500 entrepreneurs who took part in the survey said they were aware of the impending fiscal cliff, and the vast majority were fearful of its repercussions.

More than three-quarters of respondents said they were worried about the expiration of the U.S. payroll legislation that cuts the employee portion of payroll taxes by 2 percent and affords the typical household an extra $1,000 per year. Projections estimate that the expiring payroll tax holiday could cost nearly 1 million jobs and impact economic output in 2013 by nearly a full percentage point. Entrepreneurs anticipate decreased disposable income among their customer bases, which is likely to translate into a reduction in demand for their products and services.

"From a business perspective, what I'm most concerned with is consumer demand," said Mike Brey, owner of Maryland- and Virginia-based Hobby Works. "For that demand to be there, we need to ensure middle class taxpayers have spending money. That means keeping their tax rates where they are now rather than letting them go up, and extending the employee payroll tax holiday, so consumers don't see smaller paychecks next year."

Expiring payroll tax holiday only part of the picture
The payroll tax changes aren't the only fiscal cliff aspect that entrepreneurs are worried about. More than three-quarters (77 percent) of surveyed small business owners expressed concern about infrastructure cuts, while 65 percent said they feared the effects of the $500 billion in defense cuts slated to occur over the next decade. Other problematic areas included funding reductions for the U.S. Small Business Administration's business loan and counseling programs, and cuts in government contracts available to small enterprises.