Why does it have to be all or nothing? You could base the tax on "person years" so, for example, 100 employees for one year would be treated similar to 25 employees for four years. Also, you could incrementally increase the tax above the threshold, so that 26th person you hire doesn't cause a huge step increase in your tax liability, but it only adds 1/25th of that since you only added one person.
Glenn Spiczak
of WI
@
Sep 15, 2008 15:18:00 PM
I don't think it's quite that simple
You know, this is an interesting idea but it doesn't really get at the stuff that stops people from starting new businesses.
To begin with, saying "The business owners will pay income taxes on their personal income they pay themselves, but not corporate earnings," seems to me to be a futile gesture. Most small business owners are Schedule C filers; they don't pay on corporate earnings because they're not incorporated.
Except for retained earnings that they can get credits and deductions for, they pay taxes on their profits (presumably, their incomes). As stated, this part of the plan wouldn't really change anything.
Besides, I usually find in my conversations with neophyte business owners and wanna-bes that what really keeps people in their jobs and depresses entrepreneurship is employee benefits. Find a way to address affordability of health insurance for small businesses and you'll probably free up a lot of otherwise tied-to-the-job folks.
I'm also wondering what this plan would do to the federal treasury. Getting rid of all taxes, including payroll taxes, on everybody with fewer than 25 employees is getting rid of all those taxes on almost all the businesses in the country. What would the budgetary repercussions be? I'd want more information on that before I gave that idea the thumbs up.
Dawn Rivers Baker
of NY
@
Aug 11, 2008 10:09:54 AM
Different idea
Don't tax the individual income of single family (Mom, Pop and non adult kids) businesses. If they all are filed on one tax return there is no tax.
After that tax by the age of the business. None for the first two years on anything up to 100 employees; add three years after that for under 25 employees. Then the whole truck full after that.
On single family owner businesses there are no income taxes on the owner's income from the business - it was already paid by the business' income tax.
Finally, the business tax exemption timeclock starts when the first employee who files personal income taxes separate from the owner family is hired. That's the transition from the little operation to the business world.
Gerald Eberwein
of AZ
@
Aug 09, 2008 12:14:50 PM
Competition
This idea would give me an employer with under 25 a advantage in bidding for work. So know I get the work and my competitor doesn't nothing has been gained in the big picture
Mark Gray
of AZ
@
Aug 09, 2008 11:16:23 AM
Sounds better than it is.
No payroll tax means that neither employer nor the 25 employees are contributing to Social Security and Medicare and presumably would also be ineligible for benefits too. A dumb, dumb, dumb deal for the hired workers and those programs as a whole.
As for the "notch" problem above, you would see owners running multiple little LLCs with 24 employees each. And all the bigger businesses would be wholly justified to be having a fit about having to compete with them.
Matt Bandyk, a reporter for U.S. News, explores capitalism from where it all begins, with the entrepreneur, whose risk taking and experimentation provide the roots from which the rest of the economy grows. As much courage as it takes to create one's own business, even the entrepreneur needs some help, and this blog will look at news, trends, and practical advice for starting and running a small business.
Glenn Spiczak of WI @ Sep 15, 2008 15:18:00 PM
Dawn Rivers Baker of NY @ Aug 11, 2008 10:09:54 AM
Gerald Eberwein of AZ @ Aug 09, 2008 12:14:50 PM
Mark Gray of AZ @ Aug 09, 2008 11:16:23 AM
Daniel David of NM @ Aug 08, 2008 14:59:58 PM
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