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Guest Post: You Want Small Business to Start Hiring? Here's What To Do

Tyler Durden's picture





 

Submitted by Charles Hugh Smith from Of Two Minds

You Want Small Business to Start Hiring? Here's What To Do 

To incentivize small business, we have to fix the structural imbalances in the U.S. economy.

Everyone wants to know how the Central State can "help" small businesses so they will start hiring again. The answer is simple: fix the structural imbalances in the U.S. economy and start favoring real production over financial speculation.

Please note the question at hand is "what should be done," not "what can be done politically." Politically, everything I propose here is impossible. The Status Quo's stupendous power and share of the national wealth is based on preserving those structural imbalances. The last thing the toadies and parasites in Washington want is to upend the structural imbalances which feed their Masters, the Financial Power Elites and crony-Capitalist cartels.

The great value in asking what should be done is that it lays out for all to see the vast gulf between the present doomed system and where the nation should be heading.

To fix anything as systemic as small business, you need to begin with an integrated understanding of the system. This "to do" list is based on my Survival+ critique.

The Status Quo wants everyone to believe that all that ails small business can be fixed with tiny tweaks, such as increasing the depreciation rate on equipment. Those kinds of solutions are about as effective as band-aids over cancer.

If we start by asking cui bono, to whose benefit, then we discern the system is currently ordered to incentivize speculation by those Financial Elites who effectively control the institutions nominally under the control of the Central State: the Federal Reserve, the regulatory agencies, Congress, etc. Given their influence over the machinery of governance, then their private losses are simply transferred to the taxpaying public, which then borrows trillions of dollars on the bond market--and pays ever more interest on that rising debt--to cover the losses of the Financial Elites.

The conventional scheme of things is to distinguish between corporations, small business and employees. I would make a different distinction: between speculative financial churning and skimming and production of tangible goods and real-world services.

I would further make a distinction between domestic and global corporations. Global corporations are akin to empires, while domestic corporations are akin to nation-states. Global corporations now concentrate so much capital that they sit astride nation-states, moving capital and assets around to suit their own goals, and buying political power where doing so is a "wise investment."

With that general backdrop, here's my list of what needs to be done to incentivize small business formation and hiring:

1. Restore sound money. How can any business flourish when its money is being depreciated? Global companies can hedge against this "hidden tax" but small business (and wage earners) cannot.

2. Raise the cost of borrowing money and incentivize capital formation. If the Million-Price Project pegs inflation at 3%, then savings and checking accounts should pay 7%--a 4% real return--and it should cost 10% to borrow money.

Zero interest rate money available to Wall Street and the Too Big to Fail banks only encourages speculation and misallocation of capital on a grand scale. If an investment can't justify a 10% cost of borrowing, it's a poor investment and it shouldn't be made.

3. Offer corporations a choice: since they're legally considered "persons" now
, then they have a simple choice:

A. Pay the individual "persons" tax rate on all income, and have all corporate-specific tax breaks stripped away, or

B. Renounce their Supreme Court-granted rights to "personhood" and pay 0% income tax on all non-financial-related income.

Right now most global U.S.-based corporations pay around 3% effective tax rates because they game the system (which they own/influence). So eliminating the corporate tax rate for all non-financial-related income would wipe out the hidden "tax" of paying lawyers and lobbyists to game the system. It would also make the U.S. attractive globally.

Many people want the clock to be turned back to when corporations paid significant Federal taxes. Since capital and assets can be shifted anywhere now, this is wishful thinking. Better to eliminate the wasted energy gaming the system and lower the tax rate on productive capital to zero, and tax individuals who receive income from the corporations--dividends, bond yields, salaries and bonuses, stock options, etc.

There is a caveat, of course:

4. Set the income tax on all finance-derived income for individuals, small business and corporations at 50% above the first $100,000, and 75% above $1 million. All income gained from churning, skimming, selling of "financial innovations," trading, derivatives, loaning money, any and all sources of income derived from financial sources, is taxed at 50% above the first $100,000 and 75% above $1 million.

If an individual is able to generate $2 million in short-term churning, then they can afford to pay $1 million in tax. If a hedge fund skims $100 million, then they can afford to pay $75 million in tax.

There is an alternative: quit skimming and start investing in productive assets.

the $100,000 set-aside enables small-business money managers and the like to make a living by paying the same tax rates as everyone else. But once they start making more than $100,000 annually, then they pay 50% tax on all finance-derived income.

The point here is to provide a disincentive to speculation and financialization and an incentive to production of tangible goods and real-world services. Once an economy has been incentivized in favor of financial speculation and gaming at the expense of producing real wealth, it is effectively doomed.

5. Set the long-term capital gains holding period at three years
. All finance-derived income would be taxed at 50%, but truly long-term gains--three years or more--would be taxed at 25%. That incentivizes actual investments in productive assets as opposed to short-term (in high-frequency trading, mere seconds) churn and skimming.

6. Lower the Federal tax rate for sole proprietor/partnership enterprises to 7.65% up to $50,000 annually.
Right now, the sole proprietor pays 15.3% self-employment tax and 15% regular income tax (on the first $34,000), an effective rate of 30%. The wage earner pays 7.65% plus the 15%. This disparity doesn't exactly encourage enterprise. Lowering the effective tax rate on the first $50,000 (the average income in the U.S. is $49,777 annually) to that of employees would level the playing field for those trying to earn their living as sole proprietors.

7. Fix the broken healthcare (a.k.a. sickcare) system in the U.S. How can any small business thrive when sickcare siphons off 17% of the U.S. GDP, compared to 8% in other developed nations such as France, Japan and Australia?

I have proposed two ways to fix the system--both are acceptable in my view, which I have outlined here many times:

A. Eliminate the entire system of private insurance, Medicaid and Medicare. Everyone pays cash for all healthcare. This is effectively a reset to 1965. Please note the U.S. was a developed nation in 1965 and that by some metrics, was actually healthier then than we are now. Longevity has barely budged. In other words, a non-spin analysis would find we're getting precious little for 17% of our GDP.

Such a reset would eliminate all the corruption, fraud, skimming and Central State- cartel controls that have created a monster which delivers decreasing health and costs that are double that of our global competitors.

B. Institute a national system based on the Veterans Administration: the entire system is opt-in (you don't have to go to the VA, you are free to pay cash and go wherever you want) and owned lock, stock and barrel by the Central State (Federal government).

The VA is not perfect--what large bureaucracy is?--but it has provided innovative solutions to large-scale care. Yes, there are lines, and yes there are limitations, but the system costs a fraction of the cartel-crony Capitalist quasi-private system that costs 17% of GDP. Since doctors are employees of the VA, there is no crushing burden of "defensive medicine" and malpractice, nor are there opportunities for gaming the system for millions of dollars, for example, owning the MRI machines and giving every patient an MRI test at your own lab.

8. Streamline Federal regulations down to one page (two sides) for all enterprises except nuclear materials or equivalent. Central State fiefdoms and their Cartel-crony Capitalist partners love 1,000-page regulatory schemes because they are extremely effective "moats" to small business competition.

The vast majority of businesses could be regulated by two pages of common-sense, straightforward regulations--two sides of one sheet of paper.

This would mean paring the armies of bureaucrats who are currently incentivized to increase the regulatory load on small business because more regulation is highly effective job security.

lagniappe/bonus reform: Impose a Federal regulation that caps any form of local government/state annual business license or business tax at 10 times the hourly minimum wage (e.g. 10 X $8.65 = $86.50).

Local government has taken the implicit point of view that small business is a treasure trove of ill-gotten wealth and a cash cow with endless reserves of "fat" to be taxed. If you want to encourage small business to expand and hire people, then you can't saddle them with thousands of dollars a year in junk fees, the most pernicious of which is the local "business license fee" that is based on a percentage of gross revenues: even if your business is losing money and has no net income, you still have to pay a tax based on gross revenues.

Until you close down, of course, which is what the system currently incentivizes.

 


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Thu, 03/03/2011 - 13:58 | Link to Comment jal
jal's picture

FIRST find support from a majority of lawmakers.

jal

Thu, 03/03/2011 - 14:15 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

Great work by CHS again.  He has done really well to point out some really effective fixes, while simultaneously telling us why these fixes aren't in place already.  Because the system is rigged against small businesses, thats why! 

Of course sound money is a fantastic starting point, but I would also like to bring the wealth disparity to Mr. Smith's attention.  While 1% own 90 of the assets its not going to matter how sound our money is, we will still have many of the same problems we currently have. 

If we are really worried about the NUMBER of people who are unemployed all we have to adjust is how much each person in the workforce works.  If everyone was working 4 days a week, well, then there is 25% more demand for employees, isn't there?  I know no one can get by on their current hours, let alone reduced hours, but this is strictly a solution to getting more bodies in the workforce.  If we are worried about how much WORK there is for people in the economy, we need to bring our manufacturing back from China.

As an added bonus to using sound silver and gold-backed money, Mexico will be a lot more prosperous than it currently is (currently an oil and drugs-based economy), which will reduce the migrant population.  Also, stopping the war on Drugs will remove 80% of the profit for the cartels, as they would then have to compete against everyone, and would no longer be able to charge a premium for goods they have smuggled.

I don't claim to have the solutions, but I do believe in trial and error. And the first step in trial and error is knowing when your trial has 'erred', and its time to TRY something new!  Its safe to say, this trial of fiat money/financial oligarchy has erred, and it is high time we dump it in favor of something different.

Check out the Capital Research Institute:

http://www.capitalresearchinstitute.org

Thu, 03/03/2011 - 15:15 | Link to Comment NotApplicable
NotApplicable's picture

Funny, what you call a great work, I call a waste of effort.

Anyone who understand that a system is rigged, yet spouts off on how the rigger should act to fix the system, or better yet, expect the rigger to step aside fails at comprehending the "why" behind it all.

Rigger, please.

Thu, 03/03/2011 - 17:00 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

A great work*, is what I would call it, to be honest.

I agree with you that the system is rigged, and those who benefit are not interested in changing the system whatsoever.

But it is also important to be cognizant of our own complicity in the system.  It does us no good to simply blame it all on 'them'.  Yes, the Elite deserve a large share of the blame, because they have assembled the system into its current form, and kept people uneducated or atleast mis-educated, but there are still benefits from being introspective and self-critical, ie. accepting that we played a part (however small) in keeping the system going.

Thu, 03/03/2011 - 22:13 | Link to Comment rocker
rocker's picture

Demand !!!  The Elite have drained the sheeple to where they want them.  Even the Scum Bag from BAC said that there is no demand for loans from people who want to start a business. Because there is No Demand for products beyond what is already supplied by the present deleveraging of America. The elite actually prefer it this way. They do not want to stand in line at their favorite restaurant or vocation spot. In a way, you can call it crowd control for the elite.  They like it just the way it is right now. Business will hire when they have DEMAND for Product.  Until then, it is still a controlled recession.  Starving extra money and savings from the middle class with higher food and gas prices also accomplishes the same effect.  The power of the elite Central Bankers and Richie's to control their environment amazes me to this day.    

Thu, 03/03/2011 - 14:33 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

All those steps could be reduced to one.

http://www.apttax.com/

Thu, 03/03/2011 - 13:59 | Link to Comment bullandbearwise
bullandbearwise's picture

Manufacturing is surging, but no employment. Why? Because business processes everywhere have been automated by computers and we don't need people anymore.

Solution: Embrace Utopia and allow for a permanently-funded unemployed class. Are you ready for it?

Thu, 03/03/2011 - 14:16 | Link to Comment AN0NYM0US
AN0NYM0US's picture

Because business processes everywhere have been automated by computers and we don't need people anymore.

 

or

Because business processes everywhere have been outsourced to Mumbai and we don't need American workers anymore.

e.g. Guidelines for planning on offshore outsourcing

http://www.patni.com/thoughtshare/guidelines-for-planning-on-offshore-ou...

 

even the hedgies outsource

 

https://www.deshawindia.com/WhoWeAre.html

 

 

Thu, 03/03/2011 - 14:18 | Link to Comment bullandbearwise
bullandbearwise's picture

Outsourcing is just a symptom of the bigger problem. We simply don't need that many workers anymore, everywhere.

Thu, 03/03/2011 - 14:32 | Link to Comment GoinFawr
GoinFawr's picture

Hunh, so what is it you suggest 'owly'? 'Killing the poor' suit your elitist agenda?

Please correct me if you are just being ironic.

 

Thu, 03/03/2011 - 14:58 | Link to Comment bullandbearwise
bullandbearwise's picture

Not killing the poor and not being ironic.

Look, the avowed purpose of computers and automation is to make our lives easier. The natural extension of that is if everything is computerized and automated, work, as we know it, ends.

If we are to enjoy the fruits of technology we have to be big enough to understand a small cadre of highly specialized workers can oversee process infrastructure to the benefit of everyone else.

Thu, 03/03/2011 - 15:20 | Link to Comment NotApplicable
NotApplicable's picture

There are an infinite amount of unmet human needs, and therefore, an infinite demand for human labor.

The "useless worker" problem occurs when the needs do not match up with the labor skills required to meet them.

Thu, 03/03/2011 - 15:33 | Link to Comment bullandbearwise
bullandbearwise's picture

Huh? Unmet humans needs met by machines doesn't create any demand for human labor except overseeing the machines. This is easily met by a small subset of humans leaving the rest to enjoy the fruits of the technological progress. Is there anyone who would rather not work if all their needs are met?

Thu, 03/03/2011 - 14:37 | Link to Comment Meme Iamfurst
Meme Iamfurst's picture

Over the last 6 years, every day, every hour, every second, there has been nothing but misleading and disinformation for everyone to chow down on.

Now you would think after all this time. we would have learned to take 'official news' and MSM pundit chatter with less than one grain of salt   Seems not, we don't learn, and "they" know it.

What intelligent businessman/woman is going to start any business in THIS environment?  I am not speaking of the garage tinkerer start up with the next I-whatever.  I am speaking of bread and butter businesses that will hire ...to do... God knows what.  Nope, ain't gona happen.  The small businessman is in the target site of every politician as the way out and starting tomorrow, the bill is in the mail.

Give it up folks!  If this bunch in DC, on Wall Street, etc wanted the coffers to refill with tax receipts, it WOULD HAVE HAPPENED already.

  Our fearless leader trots to California to met with billionaires who could start any business that so desired, and what happened...they sat on their hands, why? 

Look at the pathetic lot our great leader has herded together to form a think-tank on jobs...please... the one thing these fine men are thinking about is a half dozen bottles of 1982 Chateau Lafitte at $1,200 a bottle at lunch at the Jockey Club which you will be paying for. But to be thinking about  'jobs' for joe six pack, get real, avarage people are a pimple on their backsides.

There is Something else that is going on, and we haven't been able to see what it is, YET.  The big shots know how "we" feel.  Nothing we are witnessing is by accident.  This dog and pony show is buying time for something else.  Can you feel it too?

But to believe that DC or Wall Street is going to do anything to get businesses jump started is a pipe dream.

Thu, 03/03/2011 - 17:45 | Link to Comment A Nanny Moose
A Nanny Moose's picture

People must build/maintain the computers, network gear, and networks over which those computers communicate. Power plants must be built, maintained and fueled to support all this infrastructure. I would argue that most of the computing power now ends up being used to comply with the regulatory Gordian Knot, and predicting the unpredictable, rather than actually producing things.

Is it really possible to create an AI supported world in which humans become irrelevant? What happens when they BSOD?

Thu, 03/03/2011 - 14:06 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Please note the question at hand is "what should be done," not "what can be done politically." Politically, everything I propose here is impossible.

Thank you Charles for pointing that out up front. The powers that be have no desire to "fix" these problems. None. Or at least fix them with regard to the plebs. It's all working out pretty good for the top 5% and that's all that counts at this point in the unwinding.

Thu, 03/03/2011 - 14:24 | Link to Comment alien-IQ
alien-IQ's picture

The sooner we accept the fact that the US, contrary to popular propaganda, is not a free market democracy but rather a Fascist Kleptocratic Kakistocracy the sooner we'll cease to waste time on brainstorming solutions that will never come to pass.

This is not a "business cycle" problem nor is it a "monetary policy" problem. The real problem is that most Americans either fail to or refuse to see what by now should be obvious: This is not the country we thought it was nor is it run by whom we thought was running it.

The solution? : Accept their ways or fight to regain control of the country. Until this is handled...all else is mere conversation.

Thu, 03/03/2011 - 15:10 | Link to Comment Hacksaw
Hacksaw's picture

AMEN

Fri, 03/04/2011 - 01:14 | Link to Comment TorchFire
TorchFire's picture

Damn straight +++

Thu, 03/03/2011 - 14:01 | Link to Comment Sudden Debt
Sudden Debt's picture

Today I've heard something so funny :)

 

"The reason why businesses don't hire is because the can't find good people and stopped trying"!

 

I kid you not, that was all over the radio today after a survey done by the government.

 

Thu, 03/03/2011 - 14:15 | Link to Comment haskelslocal
haskelslocal's picture

Today I've heard something so funny :)

 "The reason why businesses don't hire is because the can't find good people and stopped trying"!

 I kid you not, that was all over the radio today after a survey done by the government.

 

... so that means that unemployed are not unemployed if they've given up and stopped trying!

Thu, 03/03/2011 - 14:29 | Link to Comment Sudden Debt
Sudden Debt's picture

No.

It means that small companies don't hire that much because they stopped trying to look for people because they can't find people.

Thu, 03/03/2011 - 15:02 | Link to Comment Capitalist10
Capitalist10's picture

 "The reason why businesses don't hire is because the can't find good people and stopped trying"!

I own a business employing about 50 people and I agree 100% with that statement.  Obviously the survey respondants agree.  The vast majority of prospective employees we see

1) do not have reading, writing and math skills that used to be expected to graduate high school, though the prospective employee may have a college degree

2) consider showing up for work each day to be optional, depending on whether or not the employee feels like it

3) do not have anything resembling a work ethic

4) consider their main challenge at work to be how much time they can spend on facebook, twitter, texting, surfing the web, really anything but productive work.

We are also very cautious about hiring because, should you ever decide to fire one of these slackers, you have to be concerned that the only non-protected class left is Caucasian, US born, straight, Protestant men under 50 who never served in the military and do not have anything that could be considered a disability.

 

Thu, 03/03/2011 - 15:13 | Link to Comment Hacksaw
Hacksaw's picture

Has it ever occured to you that you just might be hiring the wrong people.

Thu, 03/03/2011 - 15:21 | Link to Comment Capitalist10
Capitalist10's picture

My comment applies to about 90% of the pool of prospective employees we see whenever we need to hire someone.  We try to hire from the remaining 10%, but that percentage seems to shrink each year.

Thu, 03/03/2011 - 15:23 | Link to Comment UGrev
UGrev's picture

I agree, but there is also a flip side. I've seen job descriptions that require so many damn skills that just don't fit the salary offered. I'm sorry, but as an out of work web-developer (NOT DESIGNER), I keep finding "web developer" jobs that want you to know C# and be a fucking front end/photoshop guru at the same time... for 60-80k. Uhhh..no. That there is a 150-200k job DOE. Photoshop guru's could pull 70-80+ EASILY just for doing web designs. Then top it off with actually knowing CSS, HTML and the frameworks required for crossbrowser compatibility with your design and you're talking two completely different sets of skills which they want wrapped into one person.. THEN you tack on server side development. For 60-80k..  FUCK THAT SHIT. Tripple that number and we'll talk. 

I took a knock down to contractor from my last job because they wanted to pay me a base salary for 40 hours a week and require me to work 50-60 for 3-4 months out of the year. Personal restrictions didn't allow that so I politely told them that in no uncertain terms would I dilute my salary by ~25%. 

So employers need to stop with the "And other Misc tasks assigned" bullshit as well trying to find someone who is superhuman. 

Thu, 03/03/2011 - 16:21 | Link to Comment AnAnonymous
AnAnonymous's picture

Welcome to a world of jobs scarcity.

Firms do not really require additional workforce but would gladly welcome an exceptional addition that could multitask all the small gaps that exist in a team, plus the main contribution, of course.

Thu, 03/03/2011 - 18:09 | Link to Comment UGrev
UGrev's picture

I actually like contracting/freelance. I get in , I get the job done, I get paid, I go home and I get the benefit of experience a lot of different systems and designs. 

Thu, 03/03/2011 - 15:53 | Link to Comment linrom
linrom's picture

What do you pay-$7hr! I hear this argument all the time and find out that most want their $7/hr employee to take an ownership interest, work overtime for free and be on call 24/7.

Thu, 03/03/2011 - 16:01 | Link to Comment Clampit
Clampit's picture

You're not alone, my parents operate a similar size small business and I hear the exact same complaints. I've started to theorize as to why; not blame, just understand.

One concept I've concentrated on, along the lines of Matthew Crawford's writings, is the lack of job satisfaction feedback. People are more removed than ever from the tangible benefits of their work, such that it's difficult to find motivation beyond mere financial gain. As has been pointed out here:

http://www.youtube.com/watch?v=u6XAPnuFjJc

This is a terrible motivator. Another corollary to insufficient motivation, especially on the financial side, is the current favoring of capital over labor. It's damn near worthless to actually do something as compared to owning the rights to do the same. I'm really starting to believe state protection of IP rights, where productive men must ask permission from unproductive men before producing, is closer to the root of our problems than most realize. I wish I had more time to elaborate here, but what I do want to caution on is the tendency to read the current labor pool work ethic as "the lazy next generation" without reflecting on the fact that people are a product of their environment. When all the rich and adored people in our society are borderline criminals, and almost never lay a hand on anything they "produce", it's tough to find motivation to get out of bed and be a part of it all.

Thu, 03/03/2011 - 17:50 | Link to Comment A Nanny Moose
A Nanny Moose's picture

Kids today can't even count out change without the cash register telling them.

Thu, 03/03/2011 - 14:02 | Link to Comment DB Cooper
DB Cooper's picture

Get out of the way! 

http://www.xtranormal.com/watch/8315898/

 

Thu, 03/03/2011 - 15:42 | Link to Comment chopper read
chopper read's picture

that was well done, DB.  thanks for posting.

Thu, 03/03/2011 - 16:57 | Link to Comment DB Cooper
DB Cooper's picture

Thanks Chopper - pass it on!

Thu, 03/03/2011 - 19:08 | Link to Comment Don Smith
Don Smith's picture

+1776!

Thu, 03/03/2011 - 14:04 | Link to Comment Fred Hayek
Fred Hayek's picture

Amen, Mr. Smith.

I'm going to forward this to my boss at the small business where I work.  I strongly suspect he agrees with all of it.

Thu, 03/03/2011 - 14:05 | Link to Comment AnAnonymous
AnAnonymous's picture

Problem with that story of fixing imbalances is that the US driven world system is living off imbalances and therefore people seek to increase imbalances rather than fixing them.

Thu, 03/03/2011 - 14:05 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Funny, he said it would never work and yet laid them out in detail.

Small business (as we know them now) will never thrive again. Business as we know it is never going back to the Halcyon day of pre Sep. 08.

Best plan is how do you raise a Phoenix?

ORI

http://wp.me/pXedc-br

 

Thu, 03/03/2011 - 14:08 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

He said it would never work politically because it would never be implemented. It most certainly can work, but it would require accountability in the political class. And they march to a different set of drums.

Thu, 03/03/2011 - 14:23 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Ergo, non-starters.

ORI

Thu, 03/03/2011 - 14:33 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

All lies must be immediately refuted, all myths exposed.

ORI, your tone has changed over the last few months. Why so negative? Before you talked about spiritual growth, now you are much more negative. What's up?

Thu, 03/03/2011 - 14:45 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Interesting you ask CD. Try to be a dispassionate observer and I see, on all accounts, human tendencies worsening, all around me. We are coming to a crescendo. 

And the more I get out, the more I see the terrible suffering in India, glazed over with "India Shining" slogans. Written in dust.

I suppose you are reading frustration.

But hey, they match the tone of Zh headlines nowadays, eh? ;-)

ORI

Thu, 03/03/2011 - 14:54 | Link to Comment Pee Wee
Pee Wee's picture

I know for an absolute fact that small businesses (that are growing) cannot hire the next FTE because of Federal taxes at a rate of 1/10 -- higher if your state has state taxes in addition.

Treat small businesses like corporations and the problem is greatly simplified, but as of now small business pays big business' taxes on income - that is the systemic inequality and it is pervasive (so GE pays zero and gets a refund off the backs of small business owners).

The political tide of the present is total elimination of small businesses, and every single story on the contrary is an outright lie.  Try being a small business owner and you will be disgusted.

There is a war raging against small businesses under 20 employees - let the facts do the talking instead of hip-shot speculators.  The problem is government collusion with big business and taxes, taxes, taxes.

Benefitted FTE's double that rate (2/10 additional FTE's) with the racketeering syndicate known as health care.

Thu, 03/03/2011 - 14:09 | Link to Comment NOTW777
NOTW777's picture

doesnt sound like chris has actually run a small business

Thu, 03/03/2011 - 14:38 | Link to Comment topcallingtroll
topcallingtroll's picture

I would tend to agree.

Thu, 03/03/2011 - 14:41 | Link to Comment NOTW777
NOTW777's picture

"2. Raise the cost of borrowing money and incentivize capital formation. If the Million-Price Project pegs inflation at 3%, then savings and checking accounts should pay 7%--a 4% real return--and it should cost 10% to borrow money."

small business already pays through the nose for borrowing

Thu, 03/03/2011 - 14:48 | Link to Comment TonyV
TonyV's picture

+1. The author probably never had a business where he had to deal with the lenders.

Thu, 03/03/2011 - 15:10 | Link to Comment flattrader
flattrader's picture

No joke.  So much of this is rank amatuer speculation.

He misses a fundamental problem upfront...

Capitialization (first) and expansion (second) and refinancing/consolidation (third) loans are extremely difficult to get even if SBA guaranteed...let alone dealing with an interest rate at freakin' 10%.

I did SBA lending for a while for a non-bank lender pre-2008.  The majority of applicants had been turned down by large and small community banks.  I had clients that were fully collateralized, credit worthy etc...and STILL had to scream at underwriting to get them funded.  Even at 4.00+ over prime the "home office" was loath to lend.

It was by far the most frustrating experience of my life.

The work-out end if the loan went bad was always the main consideration...even with the guarantee.

Thu, 03/03/2011 - 14:47 | Link to Comment NOTW777
NOTW777's picture

"Everyone pays cash for all healthcare."  right. this is an advantage for small businesses????

Thu, 03/03/2011 - 14:10 | Link to Comment lynnybee
lynnybee's picture

30 years of malinvestments .......... that is a tall order & will require we get rid of our financial oligarchs ........ remember when our banks were mostly small locals ?   & we actually earned interest on our savings accounts ? ....... i'd love to go back to the way it was before NIXON .    life sure would be simpler.    our lives were small & local, community based.   enjoy your fiat money & credit while you can, it's over.

Thu, 03/03/2011 - 15:57 | Link to Comment Hacksaw
Hacksaw's picture

In the 70's the politicians realized that they had raised taxes about as much as they could. J6P could no longer afford a car, a house, a TV, and a 6 pack of beer. So, they hatched the grand scheme of free trade and started flooding the U.S. with cheap foreign made crap. This kept J6P happy, as he could afford a TV and a 6 pack and it also allowed the politicians to keep raising taxes. The dolts couldn't see that free trade was in essence shipping boat loads of money out of the country, not just in trade imbalances, but in out sourced jobs as well. On top of this the politicians succumbed to the temptation to be the only ass kicker left in the world and proceeded to put military bases everywhere. Now, on top of the huge losses due to free trade they added a huge military budget to pay for most everyone's defense. Then along came the great multi trillion dollar bailout for the elites.

Now, here we are at the point that many working Americans can no longer even afford the cheap foreign made crap. Politicians are in a catch 22 on tax increases. If they raise taxes someone loses their job, if they don't raise taxes someone loses their job. I agree with you, I'd like to see the U.S. go back to communities, mom and pop retail, eateries, and banks. It won't be easy though. Those who have gotten mega rich off globalism aren't going to just step aside. I think we will have to get bloody to get back there.

Thu, 03/03/2011 - 14:13 | Link to Comment falak pema
falak pema's picture

With the Internet economy, small businesses are the future. Imagine one person with professional skills can run a company generating 5 million dollars per year without any payroll overhead except his own. It's possible. I know of examples. And the Internet makes it easier every day to find clients, suppliers and sub contractors. Provided you have a good business model.

Thu, 03/03/2011 - 18:08 | Link to Comment RECISION
RECISION's picture

Ohh, good.

So all we need is 50 million businesses just like that and America is sweet again.

That will soak up all the unemployed...

Ooohh, that's right - that's impossible... Bugger  :-(

 

Thu, 03/03/2011 - 14:13 | Link to Comment unionbroker
unionbroker's picture

 low unemployment is inflationary . my son was denied a raise because he was told that there was a zero possibility of him going anywhere else and getting more and a zero possibility of being recruited by another firm because of the excess of unemployed workers in his field. Once unemployment goes down employers will be forced to pay more thus inflation.

Thu, 03/03/2011 - 14:16 | Link to Comment GoinFawr
GoinFawr's picture

 "Since capital and assets can be shifted anywhere now, this is wishful thinking."

Well, as noted the whole piece is a dream (an admirable one, granted). But as long as we're on the subject of fantasies the way to fix the above problem is a globally enforceable minimum wage. Henry Ford was onto that one.

Thu, 03/03/2011 - 14:22 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Amen.  Well spoken.  As being actively involved in high-tech startups I would add:

1) Fix the patent system.  It is ruinous to small innovators and only rewards big business.

2) Create better ways of raising capital than working through Wall Street sharks. 

3) Prevent predatory mercantilist countries such as China, Japan, Taiwan etc, from exporting to the U.S. until they change their ways.

4) Prohibit insiders from selling more than 10% of their shares per year.  The bad behavior of a few is making it hard on everyone.

 

Thu, 03/03/2011 - 14:44 | Link to Comment Pee Wee
Pee Wee's picture

You are absolutely right on number one.

Number two is the next bubble.

Number three is very much dependent on number two.  Good models are magnets for capital on their own.

Number four can be a wash, everyone has an exit strategy, but that doesn't mean it should be wreckless.

Thu, 03/03/2011 - 14:24 | Link to Comment The Navigator
The Navigator's picture

Being the Ultimate small businessman (ultimate in small size, micro-business), here's my say:

Abolish the IRS, get rid of the current progressive tax code, go to a national sales tax - this does:

1- removes the hours spent keeping records for tax reporting, removes the hours preparing receipts and records for tax reporting

2- removes the wall preventing capital formation for small businesses

3- removes the corruption of awarding special tax loopholes for special interests (big donors to politicians to buy favored tax status)

When businesses know what the tax rate is, and is going to be in 1, 2, 5 years, we can plan ahead. The current tax system is just like the (rigged casino) stock market; only the big guys know how to game the system; they take advantage of the rules changing every 6 months because THEY own the system.

Thu, 03/03/2011 - 14:38 | Link to Comment lincolnsteffens
lincolnsteffens's picture

Been saying that for years!

Thu, 03/03/2011 - 15:31 | Link to Comment prophet_banker
prophet_banker's picture

i'd be for it if the 1st 50K was exempted, otherwise your taxing the poor more than the rich as a %

Fri, 03/04/2011 - 02:23 | Link to Comment The Navigator
The Navigator's picture

In theory I'd agree except on 3 points:

1 - once you start on the road of exemptions, the road goes on and on and pretty soon you're back to 50,000 pages of tax code

2- the administration of 2 grades/levels of taxing - how to prevent those making over $50k from defrauding and paying the lower rate - New IRS?, No thanks.

3- The poor SHOULD contribute to the country - yes, as a percentage it's more - all the more reason for them to move out of being poor and coming into the middle class - a great incentive.

No IRS, a 2 line tax code (the rate is ___ and the states will collect and forward to Timmy, and we're half way to liberty.

Fri, 03/04/2011 - 01:46 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Great idea.  And the national sales tax would finally glean some revenue from foreign corporations that operate here in the U.S. tax free. 

Thu, 03/03/2011 - 14:28 | Link to Comment kaiserhoff
kaiserhoff's picture

Some good ideas, and some crazy stuff.

If small business and large business paid about the same interest rates, best of all a free market rate, and had access to capital/loans many problems are solved.

Punitive taxes on trading kill markets.  I have been both a farmer and a grain "speculator".  In grain markets there are thousands of sellers, and often only two or three international net buyers within rational distance of the farm.  Without independent grain traders and dealers, grain would be as easy for the big boys to manipulate as,... silver.

Thu, 03/03/2011 - 14:28 | Link to Comment pussfeller
pussfeller's picture

This post seems to be calling for regulation on behalf of small business. Many people think the Gov't can work on their behalf, but they forget the law of the concentration of pressure that a small number or industry can exert on the regulatory system to make it work for them. It always seems to end up benefitting the rich, not the small, who frequently thrive in unregulated environments.

Think about it. Who began this nonsense about how regulation is for the little guy?

How about just really free lazy fair markets?

I personally don't think our big corps could survive in their present form without the Gov't propping them up. That is probably true of the average American household, too.

Thu, 03/03/2011 - 14:36 | Link to Comment topcallingtroll
topcallingtroll's picture

Mostly agree. The author is clearly a nutcase advocating more government intervention.

Thu, 03/03/2011 - 14:29 | Link to Comment NOTW777
NOTW777's picture

"4. Set the income tax on all finance-derived income for individuals, small business and corporations at 50% above the first $100,000, and 75% above $1 million. All income gained from churning, skimming, selling of "financial innovations," trading, derivatives, loaning money, any and all sources of income derived from financial sources, is taxed at 50% above the first $100,000 and 75% above $1 million."

how many real small busineses engage in this?????????????

Thu, 03/03/2011 - 14:34 | Link to Comment ebworthen
ebworthen's picture

 

Well done.

You are absolutely correct, and also correct that everything you propose is politically impossible.

The system will slowly churn and grind downward until there are riots and lots of dead people, both good and bad.

This is the progression of greed, lust, chicanery, juvenile narcissism, and the evils of the human soul dressed in finery.

The end result is war, both civil and otherwise - and then political or economical or psychological reasons are applied to explain the war.

They are all well and good but it starts with the lust for mammon, then proceeds via the other dark vapors of the human spirit.

This is why the evil in Washington and Wall Street will never, ever, in our lifetime be solved with politics or economics but only by blood on the streets.

Sad, isn't it?

 

Thu, 03/03/2011 - 14:34 | Link to Comment topcallingtroll
topcallingtroll's picture

The author clearly knows nothing about small business. I just want the government to end a bunch of unnecessary regulations and mandates.

Advocating more partisan rule making does not help small business.

Thu, 03/03/2011 - 14:36 | Link to Comment DaBernank
DaBernank's picture

Since we were healthier in 1965, I am advocating a return to the "Mad Men" diet of Smokes, Red Meat, and Scotch.

Thu, 03/03/2011 - 14:42 | Link to Comment stormsailor
stormsailor's picture

maybe that might work.  i'm tired of my small business being a "non-profit". between health-care, taxes, fee's, business insurance, errors and omissions, workers comp, unemployment.

 

as to hiring? i'm trying not to lay-off.

 

 

 

Thu, 03/03/2011 - 14:42 | Link to Comment downrodeo
downrodeo's picture

I love his suggestion about corporations relinquishing their 'person' status, I wish it would happen. A corporation is not only not a person, it is anti-people; institutionalized misanthropy at its best.

 

I guess it's fun to pretend...

Thu, 03/03/2011 - 14:48 | Link to Comment ArkansasAngie
ArkansasAngie's picture

For decades my community (Fayetteville, Arkansas) has been sending our money to Wall Street to be where the smart money was.  Now we know that's where only the Ponzi'ed go.

I'm a small angel VC and I'm investing (not speculating) locally and I'm telling everybody I know to do the same -- Some of the folks I know have Walton millions behind them.

We've took the fruits of our labor and diverted to non-productive speculation.  We need that money right here ... not in China.

Besides ... if it's right down the street you can drop in and personally see your money at work ... any time.

 

Thu, 03/03/2011 - 14:47 | Link to Comment NOTW777
NOTW777's picture

small business has no political power and doesnt pay bribes so

Thu, 03/03/2011 - 14:48 | Link to Comment proLiberty
proLiberty's picture

 

While Obama has lauched his “Startup America” blitz as an effort to increase the number of business startups, until he makes some material changes in the regulatory environment imposed by the Executive Branch, his effort is only sound-bite rhetoric.

 

A lot of small business rely on venture capital and they don't even get to that level unless they can attract what is called 'angel investment' which is small investments from people willing to consider the high risks of funding a company that may only exist on the 20 or 30 pages of a business plan.

 

In order for an entrepreneur to solicit investment funds from people, he must comply with federal regulations one of which is downright silly. People must be “Accredited” to invest in risky stocks. If someone wants to invest in startups, he must be an “Accredited Investor”, who has at least $1million in assets excluding his primary residence, or has at least a certain level of income. This means that Lindsay Lohan qualifies to make these investments but you probably don't.

 

The problem is that the Securities and Exchange Commission wants to redefine the limits of who is Accredited, and in doing so will drastically cut the number of people who can invest in startups.

 

Then there is Sarbanes-Oxley, a law that imposes expensive compliance measures on publicly listed companies. Why is this a problem? Because in order to justify the risk of investment in small companies, like ones funded by angel investors, a full fledged venture capital firm must be able to anticipate a good “exit” or sale of its stock. The simple truth of the market is that companies that are publicly held generally have a higher stock price for each dollar of earnings than do companies that are not public.

 

Because of the expense and requirements of Sarbanes-Oxley, it is now rare that a VC-funded company can “go public”, or allow the initial investors to cash out by floating a public stock offering (the IPO). So the common exit for those investors is to sell the firm to another, much bigger firm. But such sales often have lower share valuations, and thus the VC firm must accept a lower rate of return for taking the same level of risk. With lower returns, fewer startups are funded by VC firms, and less money is available to VC firms to invest.

 

There are other factors that greatly impede the level of startup activity in this country, such as how massive federal borrowing distorts the amount of money available to invest. However here are two simple things that the Obama Administration could change, and yet there has has been no talk of doing so. This is very shortsighted.

 

 

Thu, 03/03/2011 - 14:55 | Link to Comment mudduck
mudduck's picture

Add in to point #3 that if corporations are to be classified as people then the 3 strike rule applies to the top guys. This will create tons of new jobs building prisons.

Thu, 03/03/2011 - 15:31 | Link to Comment Bartanist
Bartanist's picture

I would add a couple of things.

1. Start enforcing the anti-trust laws. The telecom boom did not happen until AT&T was broken up. To David Rockefeller competition may be a sin, but to an economy competition is the life-blood of job growth.

2. Reinstate Glass-Steagall so as to eliminate conflict of interest.

3. Return the investment markets to the task of capital formation instead of gambling and fraud by doing what was done after the 1920s, get rid of ALL derivative and tracking type "bets". All they do is drain capital from real investment and create an environment where there is an incentive to create the next big scam which is a step ahead of the regulators.

4. ... and maybe but I am not sure about this, find a way to balance the cost of using offshore slave-rate labor with local manufacturing.

5. Then and only then get rid of all social welfare programs.

Thu, 03/03/2011 - 16:29 | Link to Comment SilverFiend
SilverFiend's picture

If you got rid of all social welfare programs your urban centers would be burned to the ground.  Look at these programs as a cheap way to allow you to go about your business unencumbered from people that would think nothing of duct taping your hands and feet.  Putting you in the trunk of your BMW and setting you on fire.  The last thing you would hear,  besides your own screams and skin crackling,  would be them laughing that you pissed your self.

Thu, 03/03/2011 - 18:14 | Link to Comment RECISION
RECISION's picture

+1

Thu, 03/03/2011 - 15:37 | Link to Comment prophet_banker
prophet_banker's picture

more small business fail that start up in booms than busts, to start a business during the bust, tight pinching is already figured in; so less shock

Thu, 03/03/2011 - 16:12 | Link to Comment Hacksaw
Hacksaw's picture

While I agree with most of Mr. Smith's article I'd like to see a 50 cent per transaction tax enacted on any and all market transactions.

Thu, 03/03/2011 - 22:17 | Link to Comment Xkwisetly Paneful
Xkwisetly Paneful's picture

I would like to see a fifty cent tax enacted on all inane posts on the internet. Like  income taxes I will pay my share.

Thu, 03/03/2011 - 16:32 | Link to Comment Sokhmate
Sokhmate's picture

I don't mean to be condescending, but my list of "here is what to do" has one item: abolish the Goddamned usury.

Thu, 03/03/2011 - 20:02 | Link to Comment Trimmed Hedge
Trimmed Hedge's picture

Simple:

If you have a small business, do everything possible to fly under the radar.

Otherwise, you're gonna get creamed!  : (

Thu, 03/03/2011 - 21:58 | Link to Comment Xkwisetly Paneful
Xkwisetly Paneful's picture

No need for people, the temp agency boom and their 30% cut has nothing to with the taxes and regulations.

 

One would have to be on LSfukkingD to start a labor intensive business in the United States of Liberal Social Marxism.

Thu, 03/03/2011 - 23:35 | Link to Comment jmc8888
jmc8888's picture

Unless you go for it all, you won't get squat.  Funny thing is, nothing will change, until we get ALL.  Sadly, my fellow americans might wait until the new dark age is upon us before we do anything about it.  But we're not there yet, and still can change.

The guy still doesn't understand

-Healthcare: Hill-burton standard (the gist is....for free education doctors work two years for lower [but still livable] wages, AND a dedication for the federal gov't to increase/maintain the healthcare infrastructure...i.e. build hospitals, nursing schools, etc.  These are all things that we USED to do.  Which is one main reason WHY we could afford to go to the doctors office or hospital...because the hospital didn't have a 1 billion dollar loan to pay back for building said hospital.  These sorts of things.

You need to understand that in our British Coporate Law code: adapted for america version, we have the ability to write such idiot laws with loopholes that the need for such large bills is there, which of course are made the size they are on top of that, by even more loopholes.  Get rid of this style of code, and things become much simpler.  But still, given that, it's VERY foolish to state a page limit.  More legible, smaller bills must be done in a way that is TRUE, and AGREED upon to need to be that length, not because of some arbitrary number.  (then they just need to relax some of the laws for loopholes and wow, there's no way to stop them since....two pages.) Don't set up the new system TO FAIL based off BULLSHIT.  Everybody gets the idea it needs to be smaller, but it needs to be smaller because its well written, without the bs british american code, and fulfill the reason you are writing it.  It must fulfill that reason above all else, including page limits.

-Glass-Steagall

-American Credit System

OF COURSE YOU CAN STOP the flows.  Fixed exchange rates, Stable interest rates, and other punitive measures.  So you don't need to give 0 percent to 'draw' people in.  When everyone goes for this slice of whatever, everyone ends up getting NONE. Seeing how this is going to be a WORLDWIDE change, of sovereign nation states agreeing on much of this, one might be (but shouldn't be) surprised how much this can achieve. People forget how things used to work, and diplomacy, will actually have meaning under this system, because that's how you can change things up if a country goes 'rouge' and creates imbalances.  I never lived in it, but I sure can understand it.  It's not hard.

Plus when it comes to giving up on the corporate tax rate, the fact is the supreme court has been in error for a long time regarding corporations.  It must be overturned. It will be.  It is unconstitutional even if it's been 'settled' and upheld.  Because a piece of shit, is still a piece of shit, even if generations of idiots call it something else.  At one time the same could be said about the laws regarding African Americans, it would never change, because they were constitutional, and upheld.   Even in the 60's I'm sure it didn't seem like it to some, given the pushback by the racists.  

In time, these were overturned.  Nothing less that that here must take place as to do with our corporations, and our corporate legal code.  People that think it is impossible, are idiots, who know not what is capable in life.  'man will never fly' syndrome.  Sure it doesn't look like a short path, but humans have a way of finding shorter paths when properly motivated.

If it's not something like this, the hell will not end.  But some of his ideas are getting closer.  It's just that when you go further up the trough, and solve the problem from a higher level, some of these other situations which are predicated on the current system being in place to cause the effect which he is trying to solve in his way, would change under a new system, and make the compromises CHS gives and makes them moot.  It's like Charles Hugh Smith wants to pay for putting gas into a broken down vehicle....why???  Fixing the Pinto is not an option. Buy a new and different model.  Instead of asking the gas attendent to give you 5 cents off per gallon in said broken down Pinto.

CHS has to realize we don't live in practical times.  These are DESPERATE times, for obvious 'we've been screwed over' reasons.  The people are waking up, and are mighty pissed off.  If the banksters were truly as smart as they claim based on their wages, they would have settled far cheaper before the crisis hit.  But, they didn't, now we will take all. (that's what they were/are doing to us).  They deserve 100x worse, but, at the very least we can take all that is right to be taken.  A true reset, back to true American values. Where there was a proper relationship between things.

Hill-Burton/Glass-Steagall/American (Hamiltonian) Credit System are all good past American laws that need to be rebooted into the American consciousness, law, and lives.  This time, unlike with the death of FDR, it's going GLOBAL. Call it, America's last great export.  But first we need to realize it EXISTS and that we have it in STOCK!  [talk about a way to mend our reputation.....how about by not only showing them how to emulate the best of us, but actually ENGAGE in it]

Lots of things to discuss, but the biggest way to fix things, is Glass-Steagall because that does end around all things fraudulent (RMBS/CMBS, derivatives, bailouts, etc) that can in any way affect the banking sector and its deposits. As well as being the firewall, and a way to soak up the debt of the states (after haircuts),

We need that passed 1st. 

Not having Glass-Steagall in place is a clear and present danger to the United States (and world).  Anybody not understanding this, is mentally incapacitated.  That's the reality.  Look around.

Therfore, we can use incapacitation clause in the 25th ammendment....that is if...he won't do it. (he won't, but we can ask ONE LAST TIME).

Nothing short of this will avert our hell.

P.S.  (to those saying venture capital....you only need to access the squid...because the federal gov't abdicated it's responsiblity...see lobbied...to make banksters king's of that....it DOES NOT NEED TO BE THIS WAY. Thus if you are bending over because of THIS, you are bending over needlessly....The gov't can create money out of thin air as well.  Except it won't be for speculation, but for actual JOBS and WORK.  (you know stuff that sucks up inflation from the increased supply...and as it is paid back, it's taking money out [since the federal gov't doesn't have to turn around and lever it up as much as possible to beat earnings for higher bonuses]).  Remember, no one is prohibited from loaning, the bankster JUST WON'T HAVE A MONOPOLY ON IT. 

 

Mon, 03/07/2011 - 20:45 | Link to Comment lsjcma
lsjcma's picture

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