Small businesses are the backbone of this country
The NYTimes has a section called “Noteworthy Facts from Today’s Paper” at the top of A3 every morning. What is worthy around these facts is that they are real data points. Between the interest of this administration to roll back net neutrality including the tax agenda that they are attempting to push through, it is shocking to me how little regard is given to data around these intentions.
Here is the fact that caught my attention. In the United States, 99.7 percent of all businesses have fewer than 500 employees, according to government statistics. Of those, nearly 80 percent, or more than 23 million enterprises, are one-person operations. Think about that. Essentially small businesses are the backbone of this country yet somehow there is this desire to give huge companies tremendous tax breaks (with the thought that this will trickle down?) and with the belief that the CEO’s of those organizations will make the right decisions to help all of us.
Then of course besides the tax breaks, net neutrality sits right in the middle of this. Both of these agendas make it more difficult for small businesses to compete in multiple ways. When you read the data that clearly states that the majority of people in this country work for small businesses, then why would people support and elect Government officials who are trying to make it harder for them to survive. This administration is about supporting big business and big money and yet most Americans are not part of either.
Comments (Archived):
.We are not relying on the wisdom of CEOs; we are relying on the wisdom of the market.When corporate taxes are the highest in the competitive global business environment, their reduction will leave companies with several options: increase margins/profits, maintain margins/profits and lower prices, re-invest in other areas of the company such as people or R & D.It is likely that many companies will pass along this reduction in COGS to consumers thereby providing consumers with a one-two punch of tax relief as well as providing an opportunity to build marketshare for the company itself.It is very interesting to see the impact that Amazon’s price reductions have had on Whole Foods. I can see the difference at the flagship store in Austin. It is palpable.What is worthy of further consideration is the disparity between companies which are corporations and those that are “pass through” entities.A corporate company will see its tax rate fall from 35% to 20% (it should be 10-15%).A pass through entity (sole proprietorship, limited liability corporation, partnership) will continue to see the income attributed to the owners and taxed at the applicable personal rates. In the event of a partnership with $2MM in adjusted gross income, it would be taxed at 38.6% + 3.1% for Obamacare. Meanwhile the corporate widget maker is being taxed at less than half that rate.This is simply wrong.JLMwww.themusingsofthebigredca…
To be clear I would benefit greatly from any reduction in pass through income at a lower rate. So that would be great for me. I want that.But to take the other side (as I often will do) the way I see it a corporation that is being taxed at a lower rate is also paying employees salaries which are then taxed as ordinary income. Maybe one of those employees is also an owner.So sure if I want I can be a C corp, pay a lower tax rate, pay myself a salary and get double taxed in the process. Many small type businesses are essentially taking out most of the money the business earns so that it doesn’t make sense to be a C corp.So in all fairness why should someone (me) be able to run a small business, earn income, and pay a lower tax rate than someone employed by my company who is not an owner? Sure I think as a business owner I should pay lower taxes because I take on risk (and some take on debt I don’t). But that is an entirely different discussion really.One thing I will say though about large companies is that there is no doubt in my mind that the more they profit the more money they end up spending that goes to others. For example all of these large corporations that earn billions well those billions is after they piss away billions as well and that money ends up in the hands of ordinary people. You know someone has to install the floors and supply the desks that they can afford to buy that your typical small business can’t. The profit they make is after all of the waste. I’ve always marveled at that.
.Like a lot of things about the Tax Code, the argument is not linear. Here’s the counterpoint to what you say:1. A corporation makes widgets. It has a profit of $1MM after paying everything. That profit is taxed at 20%.Net cash after taxes is $800,000.2. An LLC makes identical widgets. It makes the same profit $1MM profit. That profit is “passed through” to the LLC members and taxed at their individual rate of 38.6% + 3.1% for Ocare.Net cash after taxes is $583,000.Both companies engage in the identical business activity. Why is the activity taxed differently?Let’s throw some real world into it.Both companies have to invest in growth, so they have to use $300,000 of their net cash flow to buy new equipment. When they buy new equipment, they will also hire additional employees. This is, after all, the stated objective of the tax cuts — grow the economy, add jobs.Now, post equipment buy, the corporation has $500,000 cash and the LLC has $283,000.How about if the LLC cannot afford to distribute the $583,000? It has other obligations. The LLC members are screwed. They get the income, but no cash.Similar business activities should have similar post-tax cash outcomes. Isn’t that fair?JLMwww.themusingsofthebigredca…
Couldn’t many cases of ‘can’t afford to distribute the $583k’ be taken care of by allowing (as had been the case) income averaging?Honestly as someone who has operated like this for many years (since college basically) I think I am way ahead of the game overall the way it is and will be. And honestly the fact that a large corporation gets a break does not make me scream ‘not fair’ or matter to me. I don’t typically think this way. [1] I am actually more worried about capital gains actually and would benefit more if that was lower or if the oppressive state tax I pay was lower.One other thing I hate is the argument (just ranting off point from our discussion) any discussion of tax percentage. You know the one where someone wonders why their secretary pays a higher tax percentage than they pay. Even though they pay a boatload in absolute tax dollars.[1] What I do I care about? Why do people living in low tax states pay such small property and state income tax compare to what I pay?
.In the end, the issue is who gets to control the dollars. I have more faith in small business creating jobs than I do in big business.If we want to grow the economy and create jobs, then I bet on the small business guy who can double his work force rather than the big company who is likely to use robots.I want all widget makers to have the same opportunities which means they should all have the same amount of post-tax cash.JLMwww.themusingsofthebigredca…
Agree with you on that. Also small business where workers are closer to the actual decision maker and owner are typically less likely to be arbitrary and do layoffs unless absolutely needed. Because they personally feel the pain and have to do the deed. So in some ways those jobs are a bit more secure you could say. Of course like anything else it depends on how you define ‘small business’.
It’s the Magic Pie. Conservatives seem to believe, across the board, that the pie is not of a fixed size. The pie can grow. Wealth is *created,* not re-distributed. It’s possible for more and more people to become multibillionaires, and stay multibillionaires, without other people becoming poorer. But, they also believe that the pie can be shrunk (or at least prevented from growing) by mandated welfare programs.Liberals tend to see it the opposite way. The pie is the pie because resources are not infinite (except maybe solar and look how hard the magic-pie-based corporations have fought that). Wealth is distributed not grown. For liberals, it isn’t possible to get wealthy beyond a certain point without negatively impacting someone else’s wealth (or ability to attain wealth). This view means that the super rich must be systemically required to put back into the pie, or not allowed to get super rich in the first place. In a society where being super rich is allowed, requiring those who get there to put back into the pie is the only way to make sure that everyone gets at least *some* pie.So, it’s *good* in the conservative mind to unburden large (super rich) corporations because then they will *grow the pie.* Every time liberals reference “redistribution of wealth,” conservatives stop listening because they don’t believe in that. Wealth isn’t redistributed, it’s grown. Anyone who really wants to and who’s willing to try hard enough can grow pie. When you want a piece of pie that you didn’t “grow” yourself, that’s *pie theft.*And yeah, in my opinion, magic pie has racial prejudice as one of its key ingredients. And many people like it topped with nationalism.
.I doubt I have ever read a clearer explanation of the difference between conservative and liberal views of the creation of wealth.You suggest that wealth cannot be created?What is happening when the stock market increases in value? If you bought 100 shares of Amazon at $252.05 on 11-30-2012 and today it is priced at $1171, was wealth not created?It is difficult to see any other explanation either from a micro or a macro perspective. This is neither a liberal nor a conservative view of things. This is arithmetic and economics, not politics.On the other hand, liberals believe that they have some mandate to decide how much wealth a person may earn and to confiscate some part of it because they have a superior view of how it should be distributed or redistributed.The conservative view is that everyone should have an equal opportunity to create and own their own wealth while the liberal view is that wealth should be redistributed from makers to takers for some unarticulated reason.This is purely a political consideration and has nothing to do with economics.There is already in place a wealth redistribution system which is called the US Tax Code in which the top makers pay a disproportionate amount of the taxes which are used to run the country. The government, through welfare programs, redistributes some portion of this money in accordance with political objectives.The top 1% of earners pay almost half of all federal income taxes.https://www.cnbc.com/2015/0…Corporate taxes are not paid by corporations. They are paid by consumers who buy the products which have baked into the COGS the cost of taxes. A corporate tax reduction will inure to the benefit of the consumer.You must consider that if your assessment of the creation of wealth is wrong, then the rest of your views are equally in error.JLMwww.themusingsofthebigredca…
i can’t parse the deceit from the bullshit honestly.Not smart enough.
.Have to respect that honesty.JLMwww.themusingsofthebigredca…
http://streetwiseprofessor…. Interesting take on net neut using hard core economic theories instead of other ways people are looking at it. Lowering tax burdens are key for small businesses. Many pay at the highest rate because they are organized that way. In addition, it’s important to look at all in rates-property taxes etc that they pay-along with the thicket of regulation that they have to traverse which also adds to their costs. Lowering all in tax/regulatory burdens in the US for both individuals and businesses is key to economic growth. Writing policy in a fashion that encourages them to grow is also important.
https://granolashotgun.com/… you might appreciate this small business odyssey. Chronicles the process to take a fire station (abandoned) and remake it into a brewpub. But then it goes deeper into actual public policy and the impediments to even starting.