A reader writes:
Not sure if you have something planned for tax day, but thought you’d like a little perspective from the private sector. If you do use it, please hold back our names – a few of my clients are liberals!
The joys of being a small business owner in Obama’s America.
We are sole proprietors, therefore our business taxes are part of our personal return.
We have a great business doing what we love and clients that we feel good working for – not everyone gets to say that. Like most businesses over the last 4 years, we’ve held a very tight line
on expenses and then cut some more.
The toughest thing we did was layoff our 5 full time employees, working more hours ourselves and bridging the gap with occasional freelancers. The decision was painful, but necessary once we evaluated the impact of Obamacare and rising costs of doing business.
Since our services fall under discretionary expenses for other companies, we’ve seen about a 20% decline. They’re making due on a tighter budget as well as recycling as much as possible. On the other hand, we’ve seen certain expenses including utilities, fuel for company vehicles, supplies (computer hard drives, mother boards and such) and our local taxes skyrocket even when we’re using less of them. A good example is our fuel expenses – we’ve cut our mileage to 1/20th of 6 years ago, but our cost has doubled. We used to eat lunch “out” 2 or 3 days a week – now it’s 100% brown bagging.
We count ourselves fortunate. We pay our mortgage and give to charity. We are able to make time to spend with our kids and our parents. Three of our four children are full-time college students at a modestly priced state University (number four will join them next fall). We pay 100% of their tuition, books and housing, they cover their food and utilities.
Because of our business income they don’t qualify for financial aid, therefore they all hold part time jobs on top of all the babysitting and yard work they can pick up. Ironically, the University routinely offers them thousands of dollars in “loans” every semester that they turn down. They understand that it’s better to potentially miss a semester than go into debt.
Likewise, I roll my eyes every time Obama gives a speech about making loans available to businesses – that’s a very bad business plan in a weak economy.
I spend a full day every month and 2 weeks every year balancing and verifying that our books are complete and accurate, then deliver them to the very expensive accountant to prepare our tax return.
Even with less income this year we still hit the Alternative Minimum Tax…. therefore, all the careful tracking and scanning of expense receipts for our business and the much touted Tuition Credits get tossed in the garbage. We get hit with a 33% effective tax rate on an income of $350K.
But we were excited that we owed $16,000 less than our in-house estimate. It puts things in perspective to realize that our tax bill will only pay for operating Air Force One for less than half an hour. Or another way to look at it, is that just cutting our tax bill in half would allow us to hire back 2 entry level employees or 1 very experienced salesman.
And – I might mention – that other than feeling like we have too much government in our lives and that our taxes are being wasted by profligate government welfare – like most conservatives, we’re pretty darned happy.
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Comments
I used to have 2 employees. One of them was a “serially unemployed” person who worked for me part time for about 4 months, while he was underemployed. He only took the job because he had to apply for 3 jobs a week and was making more off of UI than working for me. In fact, working for me cut into the free money he was getting from the state.
He quit and moved away and continues to be serially unemployed. The Employment Security department at the State of Washington seems to think my business is accountable for the lifelong employment of this individual and attempts to jack my businesses rates everytime he files for UI.
In a long conversation with the UI department, I get them to waive the rate hike each time, because it’s absurd. The fact is, why should I even have to have the conversation? The woman explained to me that its a tough economy and a lot of people are legitimately out of work.
I responded to her that my sympathy for those collecting unemployment is zero. I am self employed and can’t collect UI when there is no work, I stand alone and no government program is coming to save me or my family when the wolf is at the door.
Yet if I ever make another job for another person, the government will have their hands in my pocket every step of the away. In the future I will resist hiring any employees for as long and hard as possible. It’s just not worth it.
I have two words for the government’s hand in all of this and it starts with F and ends with U.
yeah … I contracted my own work for decades, and mostly worked alone, because it was such a liability to have employees.
Hiring someone to do work for your company, that you can easily fire if they don’t perform or work slows is one thing. Adopting an employee as if he was your child is something else entirely.
This is another form of “socialism” … socialize “success” by putting the burden of less competent workers on those that are able and motivated. Considering that public unions push people ahead in pay and position based only on seniority or continuing ed hours … it is no wonder our school system is failing.
But they will be sucking us dry for a few more decades as the early retirement teachers tax us to collect their unfunded fat pensions. If I failed in my contracts, I would get no pay and certainly no early retirement. whatta world whatta world …
There isn’t enough time, nor enough words to adequately describe all the aspects of what a small business owner/self employed/sole proprietor goes through just to earn a paycheck.
Mentioned little is the fact that all too often we work all week/month without pay-just to make payroll.
As noted, you are on an island, and you sink or swim on your ability and perseverance.
It has been my experience that no one cares more about your paycheck, and that it clears, and that it’s there every week, week in, week out–than the person that signs it.
But, this government would have you believe otherwise.
This government says your boss is the enemy.
This government says there is only one boss that really cares:
That boss is the Government.
I used to fantasize about what it would be like to just go to work. Stay there all day, and get paid.
Sometimes, they tell me, you even get paid for not working-
“Ironically, the University routinely offers them thousands of dollars in “loans” every semester that they turn down.”
This is very telling in that the more a student borrows the more that they become enslaved in a system where government interference is largely responsible for outrageous tuition and other fee increases.
My hat’s off to these kids refusing to be enticed by, “easy money.” Their parents did well in instilling solid values that will pay off later in life.
The practice of giving “free stuff” that is the credo of liberals everywhere is exactly why things are no longer free.
You just cannot have it both ways…
Easy to say that crap when mommy and daddy are paying your way. This thread is full of elitist nonsense.
So you think that other people should pay your way? You think it’s right to live off other people’s earnings?
It’s a LOAN, not a grant. In a PERFECT U.S., such an arrangement would be purely between students and banks, with no government interference at all.
That isn’t the point at all. I’m just saying that it’s silly to point out the virtue of students who turn down offered loans while they’re parents are paying their boat. They aren’t virtuous at all, just lucky.
In the real world, I have to stay competitive, I have to take whatever is offered. I do not have the luxury of turning down a means to get myself educated and employable.
The system isn’t perfect (far from it). I’m not perfect. Don’t tell me these children of wealthy parents are morally superior than I am, I ain’t buying that. Capito?
Yes, I put in some terrible Engrish in there. See what happens when you can only afford a state skool? “… their parents are paying their boat.” is what I meant to say.
So quiznilo, I’m curious why you didn’t chose a financially prudent path to achieve your goals: attending a school you can afford, earn merit scholarships or get a job and save your money to pay for what you wanted?
Elitism is now having a mom and dad who put aside 20 dollars a week away for 18 years. Yeah, we dine with the Romneys at the country club on the 3rd tuesday of every month.
I’m sorry your mommy and daddy squandered your college money on booze, cigarettes, lottery tickets and carbon credits.
BTW- some of us paid our own way w/out mommy and daddy and didn’t carry student loans around like a cross for 25 years after graduation. Baaaaah, I don’t miss not having that nintendo.
Must be nice. I paid my own way through college, and I did take out loans. I happen to think that I’m *not* a lesser person because I did take out those loans.
Quiznilo,
Obviously you aren’t a lesser person, but having student or other loans can affect the decisions we make. For instance, it can result in more limited job choices because you need an immediate salary to repay loans. It can also make it harder to start your own business because you need a steady paycheck while the loans are repaid.
Years ago, I went out canvasing for signatures and came upon a retired small businessman. When I showed him the petition, he thought for a moment then said, “now that I’m retired I guess I can sign this.”
Amen to this article. We have gone without a paycheck more times in the last three years than I like to think about. This administration has strangled small businesses every which way to Sunday. In three years of college, our daughter gas taken out one minor loan, which she began repaying almost right away. We ave been able to pay her tuition and she works part time, while carrying a full load. She hates debt more than we do : )
Suffice it to say, one of our courses in homeschooling is consumer finance and credit perils!
A fascist economy LOVES large, compliant businesses. As Adam Smith understood, incumbent firms would TEND to seek protection from market forces via government collusion.
It HATES (i.e., cannot abide) entrepreneurial business, which depend on market forces for success, and on the market for the resources they need. Central planners find that too hard to deal with.
“We get hit with a 33% effective tax rate on an income of $350K.”
One thing about a small business, government doesn’t care if you work 65 hours to earn that $350K.
One thing though … IF a small business does employ that money to work for the business (to expand the business for example), then that is a deduction from revenue. The tax is only on what is kept as income. True, you pay both parts of the social security (14% or whatever), but all you invest in growing the company, that is not taxed as income. It might be taxed as a capital gain someday, but much is written down as depreciation or expenses.
So for me, the “oh but those are small business job creators” doesn’t work so well. Only INCOME kept is taxed. But Obamacare is different … it puts a big burden on the small business, and the ton of paperwork and required insurances is another huge hurdle.
Of course many illegals work on farms or as nannies … so if you have the right connections you escape those silly burdens the rank and file are required to carry.
a caveat … I guess if one earns $100,000 and actually uses that to buy equipment that year, it can’t all be written off then. So you pay income tax on 50% (I forget how much can be written off in the first year), but don’t get to depreciate it all till later. But most probably buy with loans, so don’t get hit that way.
Or maybe I’m confused … I didn’t have big capital expenditures.
Under AMT all deductions including your mortgage, tuition credits and business expenses are thrown out.
ahhh … thanks for clearing that up
I won’t bore anyone with the details of my little business. I do give Obama credit for one thing: he has made me a much more efficient business owner than I ever thought I could be. My thriving business has become a hobby. I’m hoping it becomes a thriving business again.
Capitalism always finds a way..
Always.
http://www.youtube.com/watch?v=Lo8xwNaHgBE&feature=player_embedded#!
Mr. Buckley wrote years ago, “There is nothing moral about a tax code that taxes a man at a higher rate because he chooses to drive his taxicab 60 hours per week instead of 40.”
The reason the tax code runs to thousands of pages is to list the exceptions made for favored groups, businesses, industries, or others who have successfully lobbied for the favors. But those exceptions are the biggest form of candy the government can hand out to broad segments, so socialists will always oppose simplifying reforms.
The favored groups are the ones who continue to support their lackey congressmen. “Here’s a political contribution to your re-election campaign. Now give me a tax deduction that is 100 times more valuable than my contribution.”
The tax code is the perfect way for congressmen to pay the campaign donors back with more money that they received through donations, secretly, and more importantly with taxpayers money. The Unions have been working this game for about 30 years and have bought legislation and other regulations that protect the unions at all costs, and of course paid for by the taxpaying writer of this blog and other small business owner taxpayers.
[…] The joys of being a small business owner in Obama’s America. […]
The one thing that will keep the parent of a debt free college student awake at night is the possibility that they’ll marry someone with college loans.
The horrors…
Yes, it is horrible. If you think it isn’t, try explaining why. How is someone supposed to establish themselves, with that burden dragging them down?
Wow, is this the new ‘untouchable’ class in the U.S., people with student loans?
I’ll tell you what, you can go ahead and turn down your first Social Security check when you retire. Go ahead, stand on those principles. That’s just a giant ponzi scheme, we all know this. The money you “paid in” was redistributed to current recipients long ago, “lock box” be damned.
You go ahead and turn down that first check “because it’s wrong” and then you can come back and preach at me for taking out loans.
Huh? I have no idea what you’re on about. You clearly have some sort of insecurity that’s been exposed. All we’re saying is that being in hock to the government is a bad thing, a drag on ones future, and to be avoided if at all possible.
First of all, I was compelled to pay into SS for the 55 years that I have worked.
Second, who squandered the “lockbox” funds? The democrats under LBJ to fund his so called “great society”.
Third, who continued to raid the “lockbox”? Congress did to stay in power by giving away this money to their supporters.
Fourth, having debt takes away options you may have had.
Fifth, if you like borrowing money, then have at it. Just don’t ask the “ants” to bail you out like congress and Obama did.
Sixth, I don’t know what you do to make the rent, but the government is not there to help, only to continue to take away your rent money to give it to some slob who will vote for politicians who give your rent money to them as “free money”.
Well, I don’t know who the “ants” are. Also, I’m not arguing for or against SS, I happen to believe it’s a bad idea, morally and economically.
Not to get side-tracked from the main issue, for some of us, loans are our only option for college. Are you really suggesting that kids who don’t have the benefit of wealthy parents forgo the opportunity to get themselves educated, merely because it entails them taking out some loans? Do you feel the same way about private education loans also (which were a reality up until a few years ago).
You talk about debt taking away options. Debt was the consequence of my *only* option for college. My options were to remain debt-free and without college, or in debt and educated, and the only thing I regret about my decision was that I keep mothers like Second Ammendment Mother awake at night (the only thing that keeps her awake at night) worrying that her un-tainted children might meet me one day.
Do you want your children liable for someone else’s debts?
I agree with you quiznilo. I was also unfortunately born into a family which had no ecomomic sense and had to take out loans to pay for school. I also think commenters here are elitist. It is wonderful to be born into a family that wants and can help pay for school, however, many (if not most of us) are not that lucky. I didn’t ask to be born into the family I did, but will say to 2nd Amendment Mother, I did not pick your pocket to fix my circumstances, nor will I ever pick your pocket. The fact regarding student loans is this: You can never ever discharge this debt except through DEATH. Declare banckruptcy all you want, you will have your tax refund and wages garnished until death or until the loan is paid. I understand that there is a great fear of the sheer number of folks in this country who have to take out student loans vs their ability to gain employment to pay those loans. I also understand the fear that the “bail them out” mentality will come into play with student loans. However, the chance of this type of bailout happenning is slight basically due to the sheer number and size of the number of student loans. Will some people default? Yes. Will some choose to never work again? Yes. Will that number ever be high enough to wreck our economy? Doubtful given the fact that this debt is NEVER dischargable except through death. Reality is that we have more to fear from TBTF and Dodd-Frank than quiznilo and myself taking out student loans. I emplore 2nd Amendment Mother to stay focused on the true problems in our ecomomy, rather than focusing on people like quiznilo and myself who chose to take on debt so that we can be part of the solution instead of part of the problem.
Owing money to the government is much like owing money to a loan shark. The government won’t break your legs, but only because it doesn’t need to; it can simply take the money from your bank account.
I am really going to make someone mad with this one….
Almost three years ago, I was looking to join a partnership and start a business. The business plan was sound and the financing was there, but I chose to hold off. A lot had to do with “storm clouds” I wasn’t too sure about. I told my wife and the associates it wouldn’t hurt us to wait 6months. If those clouds were moving away, all we would loose is the location and we could still move on the idea before the next shopping season. I waited, the other two didn’t.
I still have a bank account… Not so good for the other two.
This is the part that will make some progressives mad… I saw an opportunity to leverage my expertise overseas. The pay is about 20% more, but I also now pay taxes to the federal govt, my state govt, AND a foreign govt. Guess what? Paying taxes to a foreign govt can be a tax credit. And then there is a huge tax credit for living outside the US.
All in all, these credits are part of the reason I work where I do. And before some liberal starts moaning how unfair it is for me, a six figure salaryman, to be getting these tax credits, understand this… Living overseas has many a sacrifice. Never mind petro is $3 a liter (multiply that by 3.79 to equal a gallon) beef here is $2.80 per 100 GRAMS(!!!), my wife and kids are away from their grandparents, we don’t get home in time to say goodbye to loved ones who are hospitalized.
So suck it up liberals… I work hard for my wage, and am not ashamed of the tax credit. Yes, I do put the refunds in the bank, because those refunds are what’s driving my investment portfolio.
DocWahala, also likes taking a good chunk of those refunds to contribute to conservative organizations, so na-na nah-na-nah Obama!
As a owner/proprietor of my own business I can tell you it pretty much sucks. I have to agree with above commenter saying that my once thriving business now resembles a hobby. 2011 I netted 1/3 of what I did in previous years and 2012 isn’t looking much better. As I depend on other small business for my business I can tell you that they are cutting back in every way they can and have no plans to expand until Whatshisname is out of office.
The author expresses a perspective that I agree with and is worth repeating, and I quote “And – I might mention – that other than feeling like we have too much government in our lives and that our taxes are being wasted by profligate government welfare – like most conservatives, we’re pretty darned happy”
Having more control to build a business, earn everything you are paid and actually contribute to society by creating jobs and commerce for others provides most business owners with a true sense of achievement and pride. Having a government dominated by takers and power seekers whose goal is to degrade business growth and to tax anyone foolish enough to become successful can dampen things. But not enough to stop enjoying being a business owner. But if Obama and his gang do get powerful and intrusive enough to squash the initiatives and work efforts of business owners and others, then The USA will degrade faster than Rome did.