What Would Joe Do?

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Joe Works: My business is currently strained by the tax code and the heavy burdens of government regulation, unfair workers compensation insurance laws, high health-care insurance costs, and the U.S. economic conditions and trade imbalances. To talk about increasing that load is very scary for the future of business in this country. My largest cash-flow concern each year is how to have the cash available to pay the federal income taxes, and still have anything left to grow the business, increase wages, or hire additional employees. Growing businesses need profits for capital improvements, research and development, promotion, and advertising, etc. If  Mr. Obama takes more profit away, less business growth and hiring will be the result.

Joe Oster: We would, of course, have to pass the burden along to our customers, raising our prices, making successful firms less competitive. It defies logic.

Joe Zarrett: I think the cumulative plan could end up benefiting our company in the long run. Health care is a runaway cost for us and each year we seem to be paying more and covering less. Also, the benefits of zero capital gains could reignite the VC market which we'd indirectly benefit from. Again, I believe the only way we have a chance of deriving a net benefit is if these programs are intrinsically attached to any additional tax liability.

Joe Mattausch: This plan will result in a net increase in my personal taxes as a result of any future growth in my business.

Joe Albanese: In order for my business to grow and stay viable, I have to build my retained earning. My bank and bonding companies -- 2 essential life-lines to my business -- drive this requirement. We are in a highly competitive marketplace through a challenging business cycle. Higher taxes will impact our ability to remunerate our people and capitalize our business.

How big a role do taxes play in your financial planning?

Joe McMahon: As our business hopefully continues to grow, planning for taxes will play a more important factor that it has until now.

Joe Works: A great deal of my time and mental energy is consumed by struggling to hang onto as much of my profits as possible, and keeping the hungry tax code away. I have changed business structure from a C corporation to a Subchapter S corporation, and now am entering into an ESOP (employee stock ownership plan) primarily to legally avoid taxation as allowed by the tax law.  It is a huge waste of the business owners' time and talents, but necessary if growth of the business is the goal.

Joe Oster: As a closely held S corp, they play a huge role. Our cash flow and ability to secure capital funding for expansion, and even day-to-day operations, is entirely dependent on our ability to retain profits.

Joe Zarrett: Obviously, we factor our tax burden into our growth and financial planning.  However, I can't think of a time in our 10 years in business that we have altered strategies based exclusively on the tax implication.

Joe Mattausch: Tax planning is a major concern. I spent several thousand dollars this year to implement strategies to reduce my tax burden.

Joe Albanese: Taxes play a huge role in our financial planning; they comprise a significant line item in our income statement.

Do you think wealthier businesses should pay more taxes?

Joe McMahon: I think there should be some form of AMT for profitable, publicly traded corporations. Hearing that some global multinational companies pay less than we do makes me sick.

Joe Works: What sense does it make to punish the successful? Do we really believe it is right for nearly one half of the population to pay no taxes at all, and that some of those actually receive money back from the IRS? A small-business owner earning $250,000 per year will today be paying $100,000 in taxes, perhaps spending $75,000 for themselves and their family living expenses, which leaves only $75,000 to re-invest into the business. If the business is growing, that $75,000 has to go for increases in inventory costs, additional accounts recievables, equipment, and new employee training.  Businesses making more money DO pay more taxes. No, the rate of taxes should not increase, at least for businesses earning less than $100 million per year. Above that amount, I have no experience or expertise, but it still does not make economic sense to me to curtail the successful activity of a company that is hiring the workers and generating economic activity that this country needs so desperately.

Joe Oster: Absolutely not. It is the death of capitalism as we know it. This doesn't spur small-business formation and success, it solely penalizes competence. Having been in business for 20 years, I've seen 'em all come and go. The swing vote ain't taxes.

Joe Zarrett: I don't think wealthier businesses should pay more in taxes.  However, I do believe that all businesses that have achieved a certain level of success and stability should pay a proportionately similar share of taxes. Which I guess raises the question -- how do we determine this threshold?

Joe Mattausch: While no one likes to pay more taxes, I still subscribe to the idea that as a business or individual becomes more successful, they should bear a proportionately larger share of the tax burden.

Joe Albanese: I think wealthier businesses should be sure to take care of their employees. The multiplier effect of that extra dollar paid to a faithful employee that contributes to the success of a business will help the economy far more than the 35-50 percent of it that would be paid to the government via taxes.

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