Another Unnecessary
Problem
For Small Business
Problem
For Small Business
According to a blog posted by Alfonso Serrano at Fundera.com, small businesses (those employing less than 500 employees, 99.7% of U.S. companies) do the following:
- According to the Small Business Administration, small companies create 1.5 million jobs annually and account for 64% of new jobs created in the United States
- New businesses account for virtually all new job creation in the United States
- A 2015 study by the Kauffman Foundation found in the last 3 decades the companies in their first year created 1.5 million jobs annually
While there are exceptions, one of the things most new small businesses have in common is they are not well-financed. As they grow, most of their income has to be re-invested into the company. But as they grow, they also need to attract good employees.
A business which has grown to a value of $500,000 is likely at a point where they want to attract an employee who can take on more responsibility, but in many cases, they’re just not at a point where they can afford to offer the kind of salaries and benefits their larger competitors can offer.
So, what can these small businesses offer to a valuable employee to induce them to accept a smaller salary and fewer benefits? Ownership.
An employee who sees the growth potential in a business will be willing to stay if they have an ownership interest in the business.
Sounds simple, the employer wants to offer ownership and the employee wants to accept it. This should be a win-win situation for both sides. But wait, the income-payroll-tax-system doesn’t like this arrangement.
If the business has grown to a value of $500,000 and the owner gives 20% to the key employee,
the key employee has to report $100,000 as ordinary income in the year it was received, and pay income-tax on this amount.
This means for the key employee to receive the 20%, he or she will have to pay the $20,000 to $30,000 in income-tax and then hope the 20% will be worth at least the $100,000.
You say wait a minute, isn’t getting something worth $100,000 for just $20,000 to $30,000 a good deal? It is if the business continues to grow but what if it doesn’t? Logically, the key employee should be able to recover the income-taxes paid in the year the business failed. But not under the income-payroll-tax-system. You can only deduct $3,000 per year against your income. You pay the tax in year one and then you can only deduct the full amount of the loss over 7 or more years.
You ask, don’t many employees who work for large companies receive stock options which don’t generate any ordinary income but allow the employee later to sell the stock and pay capital gains tax at a much lower rate than is charged for ordinary income?
The answer is yes, if you fully comply with a very complex minefield of rules and regulations. A large business can pay tax counsel to draft the program to give stock to employees with no adverse tax consequences to the company or the employee.
However, many of these small businesses don’t have this option. They are barely keeping the doors open and can’t spend the necessary dollars on tax counsel.
The Ruling Class Is Protecting Big Business
One of the secrets BIG businesses try to keep hidden is just how much they like the complexity of the present income-payroll-tax-system. This seems counter-intuitive.
Don’t the big businesses recognize the present income-payroll-tax-system makes them:
- Less competitive in world markets?
- Employ fewer American workers?
- Pay American workers less?
- Their products 12% - 20% more expensive to American consumers?
- Concentrate not on producing more products at better prices but on how to reduce their tax liability?
The officers of these BIG businesses are very smart people. They do see the benefits of The FAIRtax. However, most of these officers are not judged by the long-term performance of their companies but by what it’s doing now. They worry removing their advantages under the income-payroll-tax-system may cause a temporary drop in net income.
Since most of these officers, like much of the Washington establishment and the rest of us, have mortgages and children in college, they are primarily interested in keeping their jobs. They are concerned they may lose their jobs during the transition period even though they know that The FAIRtax is much better for everyone.
Conclusion
The FAIRtax will take away jobs in industries which exist only to deal with the complexity of the present income-payroll-tax-system, for example, like income-tax preparation companies. However, most other companies will see immediate growth and many of the displaced workers will be hired by these companies who are now expanding.
This will be particularly true for smaller businesses who no longer have to devote meager resources in trying to comply with the corrupt income-payroll-tax-system. Since smaller businesses are responsible for so many U.S. jobs, this will increase job growth even more, and require employee wages and benefits increase.
In short, the only people who lose in the short-term are people who depend on the present income-payroll-tax-system. Even these people will find opportunities to work in much more productive ways.
What about IRS employees? They will be able to move laterally to other government offices. Wouldn’t it be great if the best IRS auditors were transferred to the DEA and went after drug dealers who were hiding money?
Like the impact of the automobile on the buggy whip industry, companies either change with the times and make new products, or they go out of business. This is the wonderful fact of the free market.
It's time we demand NOW the solution benefitting everyone! Pass The FAIRtax—the only "Fair tax"?
The author George Bernard Shaw said these words in a play he wrote, You see things; and you say “Why?” But I dream things that never were; and I say “Why not?”
Isn’t it time for us to ask, “Why not?”
President Trump, “Embrace the FAIRtax, the only Fair Tax the only fair tax and the only real tax reform! Stand up to the Swamp. They will oppose you anyway because they see you as a threat. What have you got to lose?”
The truth is the truth. Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:
“If you want a picture of the future, imagine a boot stamping on a human face—forever.”
Take Back America Again! Pass The FAIRtax Now!
FAIRtax Online Resources
Americans For Fair Taxation - Home Page
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Americans For Fair Taxation - YouTube Channel (The Chairman's Report is now posted here)
Americans For Fair Taxation - Twitter Page
Americans For Fair Taxation - Chairman's Report Podcast on Spreaker posted Fridays at 6am-ET
Americans For Fair Taxation - Chairman's Report Podcast on Apple
Americans For Fair Taxation - Chairman's Report Podcast on iHeart Radio
Official FAIRtax Logo Store
The FAIRtax Guys - Home Page
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The FAIRtax Guys - YouTube Channel
PopVox - The People’s Voice On All Things Legislative
Read Evasion Study Summary
The FAIRtax Guys
Ron Maiellaro & Bob Paxton perform their FAIRtax Power Digital-TV Show & Podcast. When the show streams to Facebook, The FAIRtax Guys plus a few AFFT experts are responding “live” to your comments and questions. A free app is available for iOS and Android.
Digital TV: Tue-8PM-ET Americans For Fair Taxation - Facebook Page
Podcasts: Tue-9PM-ET Posted on Spreaker, Apple Podcasts & iHeart Radio.
Digital TV are available on The FAIRtax Guys
This week's Episode #195 - "FAIRtaxing A Candidate"
It's an election year and candidates all over the country are polishing up their boiler plate non-answers to tough questions. Watch & listen as The FAIRtax Guys role play an interview with Candidate Bob Paxton who wants to win his election buts seems to have some problems with The FAIRtax.
This episode is meant to be educational as well as entertaining. Actually, no candidate would subject themselves to 20-minutes of questions on a subject of which they know very little. However, we can learn what we might expect to hear and how we can handle their non-answers or even misinformation.
It’s very important we all get out there and engage with candidates at all levels of the election process and at all levels of office (local, state, federal). You never know who might make it into Washington in the future.
Join The FAIRtax Guys as they explore how to engage with elected officials and candidates who are new to the election process.
As always, the AFFT is looking for volunteers to help their efforts. Watch or listen to see if there is some small way you can help.
There’s always more in FAIRtax Power Radio such as a reminder of the promotional items available now at Our Store and a review of Jim Bennett’s Grassroots Corner Report.
What Can Each Of Us Do?
Call the local and DC offices of your Representative and 2 Senators. Use the following script:
- I am sure Representative ____ or Senator ____ is in favor of everyone obeying the income tax laws.
- After they assure you their boss is not in favor of anyone breaking the law, ask if they are aware of the Cebula study showing $9 trillion of evaded income-payroll taxes over the next 10 years.
- Since most will say they don’t believe their boss has seen the study, drop off a copy, email a copy or click Read Evasion Study Summary and copy/paste the link into an email.
- Say you are going to call back in a week and ask what the Representative or Senator is going to do to stop this evasion.
- In a week, call back and ask specifically what the Representative or Senator is going to do to enforce the law.
- They probably will say their boss believes simplifying the income tax will handle the problem.
- Explain, when people evade income taxes, they are also evading the 15.3% payroll/Medicare tax and state income tax. So, it’s unlikely they are going to pay 30-40% when they were paying 0% because they have already decided it’s okay to cheat.
- Say, the only way to reduce evasion is to increase by tens or hundreds of thousands the number of comprehensive IRS audits done each year.
- Point out Evaders do not self-identify by putting an “E” on their income tax return.
- 80% of the people likely to be audited are trying to comply, but they will be forced to endure these IRS audits as well.
- Ask if the Member is in favor of this?
- If they say no, then ask again how the Member proposes to stop people breaking the income tax laws.
- Then explain the way to handle evasion without unleashing the IRS audits is The FAIRtax.
- If you meet with your Representative or attend a town hall and ask these questions, you will be even more effective.
American's Big Solution - The FAIRtax Primer America Needs
Hard to believe but there still are people who have not heard of The FAIRtax. For those people, America’s Big Solution provides a starting point in their study of The FAIRtax and is meant for any age.
America’s Big Solution is an introduction to The FAIRtax written by Terry Tibbetts, author of “A Spartan Game: The Life and Loss of Don Holleder”, with help from Ron Maiellaro, President The Florida FAIRtax Educational Association. You can buy an electronic version for only $2.99 for the Amazon Kindle, the Barnes & Noble Nook and Apple iOS. You can purchase a print copy at the same Amazon link above for $9.25.
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Thank you for staying FAIRtax strong!
Yours In Liberty!
Steve Hayes
Chairman, Americans For Fair Taxation