America's Got Talent is the #1 show. Spiderman is the #1 movie. Call Me Maybe is the top song in the country. And who's the most popular guy in Washington, DC?
Why...it's me! The small business guy. Everyone's buzzing about me. That's because I represent more than 20 million others who are supposedly just like me. According to the National Federation of Independent Businesses my confidence is down. Oh no! But no worries. The President and Congress are battling over ways to help me succeed. Hooray!
I appreciate everyone's concern. And I certainly love the attention. But really, I don't want to waste your time. My technology company has 600 small business customers. And I agree that I don't have the right to speak on behalf of the other 19,999,400 small businesses in the country. But then again...why not? I know that small businesses will be an important part of this year's election. We're already getting a lot of attention from the media. So let me help explain a few things. And put to rest a few silly myths about us.
Silly Myth #1: Small businesses collectively oppose higher taxes. My customers sell scrap, provide roofing services, distribute machine parts and build wrought iron fences. These are good, hardworking people and they also hate to pay taxes. Why? Because we are control freaks. We're the ones with the TV remote. We do the barbequing when family comes over because our wives don't know how to cook a steak as good as we do. And, as small business people we believe that we can spend our money more wisely than the government. But...we do not oppose higher taxes. We know that the government, like our own businesses, requires revenues to run. And sometimes, like our own businesses, a rate increase is needed. When I'm forced, every few years, to raise my hourly rates, I need to be darn sure I can explain why to my customers and justify the rate increase with added value. And that the increase won't happen again for a long time. Small business owners are looking for that same rationale from the government.
Silly Myth #2. More taxes on the wealthy will significantly hurt the economy. I hate taxes like the next guy. But the fact is that the President's proposals are to let rates rise for those families making more than $250,000 a year...but only on the amounts in excess of $250,000. So if a business owner brings home $350,000 per year he'll pay 5% more taxes on the extra $100,000 of income or $5,000. That stinks but it's not the end of the world. Personally, I'd rather see that guy keep the $5,000 and spend it on a vacation, roof repairs, a diamond necklace for his wife, an upgrade to his accounting software or to help this guy buy a new car already for God's sake. Oh, and hire more people because he's the guy that's mainly doing that. Those are all things that would probably help the economy more than just giving it to the government. No, the additional tax rates won't kill him. It's just that a lower (and more importantly long term and stable) tax structure would help him a lot more.
Silly Myth #3: People and small business owners who make $250,000 per year are wealthy. No they're not. They're not doing so bad, mind you. But they're not wealthy. At least a third of that money will go to Federal, State and other taxes. The majority of what's left will go towards tickets to the Dark Knight Rises along with a large popcorn and a Coke. The remainder will go towards the mortgage, car payments, clothes, alimony, cable, Scientology fees, insurance, summer camp, a vacation, healthcare and maybe, just maybe, a retirement account. Oh...and a college fund. It's a good life, but not the high life. And by the way, the people that I personally know who run businesses and make that kind of income easily work fourteen-hour days to make that happen. They have the pressure of people depending on them. They deal with many, many problems. They are stressed out. No one, with the exception of Scott Disick, just sits back and makes their money by doing absolutely nothing worthwhile.
Silly Myth #4: Tax incentives create jobs. No they don't. Most of the small business owners I know laugh at the government's attempts to help them hire. A tax credit to hire someone is nice but if we don't need the person we're not going to hire them just because a credit is offered. Here's why: I still have to pay the employee's salary and benefits. So I'm still significantly out of pocket, despite the tax credit. Even Jared Bernstein, a former economic adviser to the President, admits that there's no hard data to support that tax incentives create jobs. The government can't make me create a job for someone. Only more demand can do that. Or, of course, a request from my largest customer to hire his kid for the summer.
Silly Myth #5: All government incentives are useless. That's not true either. Some do work. Extending the popular Section 179 deduction where smaller companies can immediately write off the purchase of certain capital equipment and investments has always been helpful. Credits for research and development really do spur research and development. Targeted tax relief in certain urban zones can attract businesses to build and invest. Easing of rules (like the "Quick App" for surety bond guarantees from the Small Business Administration) helps us get money faster.
Silly Myth #6: 990,592 new jobs will be created by the Senate's Small Business Jobs and Tax Relief Act. Not 990,593? What about that poor guy...? I've done my own calculations and I think it will actually be 990,589. So there! I mean really...is anyone believing this data? Our government cannot even balance its own budget by a trillion dollars but they can predict the number of new jobs to be created by a proposed legislation to that degree of certitude? Wow! The fact is that small business owners don't believe most of the predictions provided by the government (or their research organizations) any more than we believe that professional athletes are braver than the average guy. They're definitely not. We hear about the upcoming "taxmageddon" and the "fiscal cliff" and we know that the people predicting disaster were the same people who predicted that last summer's credit downgrade of U.S. debt would be calamitous (it wasn't). And where were they prior to the 2008 financial meltdown? The latest financial downturn has taught small businesses that those super smart Ivy League guys on Wall Street and corporate boardrooms and in Washington policy think tanks still...don't have a clue.
Silly Myth #7: The Government can create jobs and stimulate the economy. We don't believe that either. The Government is, at best, a third of Gross Domestic Product. We've seen the Fed ease money and keep interest rates at near zero over the past few years. We've watched our President spend trillions on stimulus and tax incentives. We've let cats run our towns. nd all we've got to show for it is an anemic 2% growth rate and a couple of new democracies in the Middle East. Big whoops. Don't misinterpret me - governments can help get the ball rolling. The Marshall Plan began an economic recovery after World War II. Johnson's 'Great Society' (not to mention the Vietnam War) helped spur growth. Reagan's defense build up in the wake of Soviet aggression was one part of his economic recovery. A stable tax system and well managed Federal Reserve is critical. But the government can only do so much. M&A activity was a big part of the stock market explosion during Reagan's administration. A dot-com boom fueled the economy under Clinton. A housing surge helped Bush. Any random thing could happen that would make our next President seem like an economic genius. Small business owners do NOT look to the government for answers. We try to avoid dealing with the government whenever possible.
I hope this clears up a few myths about us. Now if you don't mind, I have some work to do. I've got exactly 990,592 new jobs to start creating and that's not going to happen overnight!
A version of the above appeared on Inc.com
Follow Gene Marks on Twitter: www.twitter.com/genemarks
Gigs
President Bill Clinton
And I also recognize that government stimulus that helped the states keep people employed saved us from going into a depression. I'd like to see another one.
We hire when we have work. We have more work when more people have money to spend. When more people are employed - and that includes government workers of all kinds -- more people have money and more small businesses hire. It's really pretty simple.
What he didn't mention (and is really important) is that a $250k cap would actually spur spending by many of these small businesses. If I made 300k net after expenses, I'd take $50,001 and put it into something like new equipment and stay in the lower bracket...
That is basically how it is with income and overtime. In NJ, you might work 1/2 hour too much overtime and actually lose 2 hours of income in the same paycheck.
Government waste more than one-fourth the current budget every year.....................Fix that and we can talk about taxes.