Thoughts Before The Alarm Sounds

     (1) Large is small. According to the GOP definition, any business, e.g., a partnership or a Limited Liability Company, that passes its net income through to its owners for inclusion on their personal federal income tax returns is a small business. There is no limit to the amount of income such a company can earn! For example, privately owned companies Cargill and Koch Industries each had over $100B in revenues in 2011, yet qualify as small businesses under the GOP's definition!      While agreeing in principle that the tax code needs revision, the Democratic Party would limit the definition of small business to one that has a net income not exceeding $250,000. While that figure may be a bit low, it certainly makes more sense than basing it on how the paperwork is set up.      (2) The estate tax is killing small business. Through 2012, there is no estate tax on estates not exceeding $5M in value. Unless Congress extends...

     In a September 25th speech at Education Nation, Mitt Romney said: “The largest contributors to the Democratic Party are teachers' unions. And so, if they can elect someone, then that person is supposed to be representing the public vis-a-vis the teachers' union, but actually most of the money came from the teachers' union. It's an extraordinary conflict of interest. That's something I think is a problem and should be addressed.” He added later, “We simply can't have a setting where the teachers' unions are able to contribute tens of millions of dollars to the campaigns of politicians and then those politicians, when elected, stand across from them at the bargaining table.”      Romney has a point – according to Open Secrets, the American Federation of Teachers and the National Education Association contributed about $5.4M to federal candidates, parties and committees during the 2008 election cycle. About 95% of the contributions went to Dem...

According to the non-partisan Tax Policy Center, 93% of the non-taxpaying freeloading Americans earn $50K or less, 5% earn between $50K and $100K, and the remaining 430,000 nonpayers earn more than $100K per year. The last group includes about 4,000 households with annual incomes in excess of $1M. In spite of what Mr. Romney said, I doubt that all of these “government dependent” people are going to vote for Mr. Obama. But lately there have been signs that the group of people which the GOP considers unworthy of consideration is much larger than the 47% group. For example, in honor of the Labor Day holiday, Eric Cantor, the house majority leader, sent out the following Tweet: “Today, we celebrate those who have taken a risk, worked hard, built a business and earned their own success.” This would come as a surprise to Matthew Maguire, who first proposed the holiday in 1882 while serving as the secretary of the Central Labor Union of New York, or Peter J. McGuire of the American...

Let's pretend that you are the sole proprietor of a small business – one that employs 15 or 20 people. Suppose you manufacture two products: shirts and widgets. Both lines are selling very well - your bottom line nets out to about $100K, on which you pay about $15K in income tax after deductions. Now the government, in its relentless pursuit of job creation, lowers your taxes to $13K. How many new employees will you hire with that extra $2,000? (A no-brainer.) Suddenly your sales of shirts drop 50% because your competitors have outsourced their production to India; do you keep all the employees in the shirt production line, or do you lay some of them off? (Another no-brainer.) Your accountant tells you that the government will give you a hefty allowance if you install automated equipment (made in China) that will enable you to compete. In fact, you will need even less employees than you have now! Do you buy the new equipment? (This is almost too simple.) Suddenly a ne...