Tuesday, April 28, 2009

Small business prepares for battle with the administration

It seems that many small businesses are bracing for a tax battle, according to this Washington Post article (via Newsalert):

Business groups say they're bracing for even more battles with the administration.

"They're desperate for revenue. And therein lies the concern of the broader business community," said R. Bruce Josten, chief lobbyist for the U.S. Chamber of Commerce.

"We're going to be a permanent target, and we understand that," added Catherine Schultz, vice president for tax policy at the National Foreign Trade Council. "The way they see it, corporations don't vote."


A nurse turned entrepreneur is used as an example of how much the extra tax would cost, to her pocket book as well as her ability to expand and hire:

The accountant, Carroll Hurst, said Johnson is unlikely to owe any federal taxes this year due to accounting changes that confer a one-time tax benefit. But in a typical year, he said, Johnson and her husband earn about $515,000 from various entities related to the schools. They claim around $90,000 in deductions -- much of it contributions to charity -- reducing their taxable income to around $425,000. Johnson said the sum they take home in wages is "substantially less."

In a typical year, Johnson's federal tax bill would be about $120,000. But starting in 2011, the higher marginal rates would add about $13,000 a year, Hurst said. Capping the value of itemized deductions at 28 percent would add another $10,000, for a total increase of $23,000.

And Johnson's tax bill stands to grow dramatically if Obama were to revive a plan to apply Social Security tax to income over $250,000 instead of capping it at the current $106,800. Because Johnson is an employee and an employer, she would have to pay both portions of the tax, Hurst said, tacking another $30,000 onto her bill.

Johnson said such an increase would force her to consider scaling back operations.


My prediction? More and more businesses like Johnson's will decrease hiring and expansion, and/or "go John Galt." People will wonder why their opportunities are drying up and look to the government for help, not really understanding that the government created the mess to begin with.

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18 Comments:

Blogger MikeT said...

And of course, the "free press" we are told is so essential to a vibrant, multi-party democratic state will take a single side, and insist that it is everyone else's fault.

I hope for the day that people will finally understand that the media--Fox, CNN, NY Times, etc.--are not the "free press" that the first amendment refers to. The "freedom of the press" is nothing more than the right to publish your free speech and disseminate it. There is no concept of "reporters' rights" in the first amendment, only the right of all citizens to freely publish.

7:47 AM, April 28, 2009  
Blogger smitty1e said...

Drunken idea: what if state governments stood up and protected their citizens from the fed?
[Takes another hit off the bottle of Jack Daniel's]

8:29 AM, April 28, 2009  
Blogger Brett Rogers said...

How about if these small business folks use their best practice entrepreneurial passions to explore ways to get politicians out of their business? And better yet if they can find a way to monetize it... that way, they can generate revenue driving corrupt politicians out of office. Seems poetic to me.

9:13 AM, April 28, 2009  
Blogger David said...

Obama and his core supporters seem entirely committed to the idea that educational credential--especially from "elite" institution--and are very uncomfortable with the idea that people can succeed in other ways, as with small businesses. They are looking for a single status hierarchy to replace the multiple status hierarchies that have always existed in America.

9:41 AM, April 28, 2009  
Blogger info said...

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Business groups say they're bracing for even more battles with the administration.

"They're desperate for revenue. And therein lies the concern of the broader business community," said R. Bruce Josten, chief lobbyist for the U.S. Chamber of Commerce.

"We're going to be a permanent target, and we understand that," added Catherine Schultz, vice president for tax policy at the National Foreign Trade Council. "The way they see it, corporations don't vote." ....

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10:11 AM, April 28, 2009  
Blogger Josh said...

Hello from your friendly neighborhood liberal. I'm a fan.

"They're desperate for revenue. And therein lies the concern of the broader business community," said R. Bruce Josten, chief lobbyist for the U.S. Chamber of Commerce.

That seems to be the major concern, and most government programs to help the economy are meant to increase aggregate demand. If you're a businessperson, that means more revenue. Lower taxes won't help anyone without revenue.

Furthermore, if customers are in short supply, why would anyone "go John Galt" and give them up? If you're a business owner, you should hope that others go John Galt! That means more customers for you! I doubt very many people will voluntarily give up income in an environment like this; and, if they do, others will readily take their places.

11:23 AM, April 28, 2009  
Blogger Joe said...

I ran a small business in the last half of the 1990s. There was no question that government of all levels, from the county to the state and then to the federal are at war with small business. Their rhetoric is that small businesses are great; their actions are that small businesses are an annoyance which should be put away.

I will say, though, that the worse tax I had to deal with was the property tax administered in my state by counties. The depreciation schedules make no sense and the amount of physical tracking you have to do is unbelievable; the obscure rules for inventory don't help any. I was a tiny company, I can't imagine how much the bureaucracy of this tax would cost a large company.

11:35 AM, April 28, 2009  
Blogger David said...

Josh...most of them will not "go Galt" in the strict sense...what they will do is trade in their entrepreneurial activities for a position in a large (government or private) organization, which will offer more security, less hassles, and probably less work...but which will involve the sacrifice of their dreams and will also in many cases be less productive for the economy as a whole.

12:59 PM, April 28, 2009  
Blogger Hubcap said...

Well put. Love your blog.

8:08 PM, April 28, 2009  
Blogger Mike said...

In my industry, it is very difficult for companies to increase revenue right now. Increases in the cost of doing business are generally offset by reducing the number of people hired or cutting their pay and benefits. It's either that or go out of business. I wish politicians would understand that tax increases cause job losses. Or maybe they understand and don't care.

12:50 AM, April 29, 2009  
Blogger jimbino said...

Going John Galt could mean simply moving offshore to tax-favored places like Hong Kong. Those who didn't move would pay the price, just as those who still try to make cars, tools and toys on-shore have been paying the price.

10:53 AM, April 29, 2009  
Blogger uncle ken said...

"My prediction? More and more businesses like Johnson's will decrease hiring and expansion, and/or "go John Galt." "

It's already happening. Compare FedGovCo figures on tax revenues noth by month this year v. previous years. Through March, federal receipts were running 14% behind the previous year.

12:32 PM, April 29, 2009  
Blogger Josh said...

Josh...most of them will not "go Galt" in the strict sense...what they will do is trade in their entrepreneurial activities for a position in a large (government or private) organization, which will offer more security, less hassles, and probably less work...but which will involve the sacrifice of their dreams and will also in many cases be less productive for the economy as a whole.They would have anyway. The goal of government stimulus is to increase aggregate demand, which should increase revenue for businesses. You can disagree with that for technical reasons, but that's the goal.

That spending will be paid for by issuing debt, printing money, and taxing people. It's tough to get the balance right. Many economists have argued that the wealthy are more likely to hoard money, so it may make sense to tax them at a greater rate for the sake of efficiency. Again, you can disagree for technical reasons, but the idea is certainly not to destroy people's dreams for no good reason.

4:08 PM, April 29, 2009  
Blogger br549 said...

Depends on whose dreams - and what those dreams entail.

For instance, Obama is living his dream right now. One man's dreams can be another man's nightmares. Obama is very found of saying that he is re-making America. I'm just not a democrat, so I have never been happy with any president who was. Sadly, I can say the same about some of the republican presidents we've had as well.

I have been thinking a bit on statements made by others of the feminization of America. Hope and change might be attractive buzz words to many females.

The old terms of the manufacture and sales of "soap and hope" always being lucrative, come to mind. Beauty parlors and boutiques by the truckload bring "change" to mind.

Make up, body oils, perfumes, new and different clothes, and ever changing hair color and hair styles = hope and change?

9:01 AM, April 30, 2009  
Blogger David said...

"Many economists have argued that the wealthy are more likely to hoard money"..hoarding money=investment. Investment=jobs + future wealth.

Aggregate demand is created by the purchase of a new machine tool or a new fab line in a semiconductor plant or the hiring of programmers to write a software product just as much as it is by the purchase of consumer goods on a credit card. With this difference: the investment purchases will create future wealth and the pure consumption expenditures will not.

2:13 PM, April 30, 2009  
Blogger njartist said...

This tax burden also means that those who are laid off or are self employed and can't find work will have a much tougher time starting a business.

10:05 AM, May 01, 2009  
Blogger Josh said...

This comment has been removed by the author.

10:13 AM, May 01, 2009  
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