7 Silly Myths About the Economy, Jobs, Taxes & Small Business
America's Got Talent is the No. 1 show. Spider-Man is the No. 1 movie. Call Me Maybe is the top song in the country. Who's the most popular guy in Washington, D.C.?
Why, me! The small-business guy. Everyone's buzzing about me. That's because I represent more than 20 million others who are supposedly just like me. According to the National Federation of Independent Business, my confidence is down. Oh, no! But don't worry. The President and Congress are battling over ways to help me succeed. Hooray!
I appreciate everyone's concern. And I certainly love the attention. But really, I don't want to waste your time. My technology company has 600 small-business customers. And I agree that I probably don't have the right to speak on behalf of the other 19,999,400 small businesses in the country. But then again, why not? I know that small businesses will be an important part of this year's election. We're already getting a lot of attention from the media. So let me help explain a few things. And put to rest a few silly myths about us.
Silly Myth #1: Small businesses collectively oppose higher taxes.
My customers sell scrap, provide roofing services, distribute machine parts, and build wrought-iron fences. These are good, hard-working people, and they also hate to pay taxes. Why? Because we are control freaks. We're the ones with the TV remote. We do the barbequing when family comes over, because our wives don't know how to cook a steak as well as we do. And, as small-business people, we believe that we can spend our money more wisely than the government. But we do not oppose higher taxes. We know that the government, like our own businesses, requires revenue to run. And sometimes, like our own businesses, a rate increase is needed. But when I'm forced, every few years, to raise my hourly rates, I need to be darn sure I can explain why to my customers and justify the rate increase with added value. And that the increase won't happen again for a long time. Small-business owners are looking for that same rationale from the government.
Silly Myth #2: More taxes on the wealthy will significantly hurt the economy.
I hate taxes like the next guy. But the fact is that the President's proposals are to let rates rise for those families who earn more than $250,000 a year and only on the income in excess of $250,000. So if a business owner brings home $350,000 per year, he'll pay five percent more taxes on the extra $100,000 of income, or $5,000. That stinks, but it's not the end of the world. Personally, I'd rather see that guy keep the $5,000 and spend it on a vacation, roof repairs, a diamond necklace for his wife, an upgrade to his accounting software, or to help this guy buy a new car already, for God's sake. Oh, and hire more people because he's the main guy doing that. Those are all things that would probably help the economy more than just giving the money to the government. But I don't believe the additional tax rate will kill him or further wreck the economy. I just think that a lower (and, more important, long-term and stable) tax structure would help him a lot more.
Silly Myth #3: Small-business owners and other people who make $250,000 a year are wealthy.
No, they're not. They're not doing so bad, mind you. But they're not wealthy. At least a third of that money will go to federal, state, and other taxes. The majority of what's left will go toward tickets to The Dark Knight Rises, along with a large popcorn and a Coke. The remainder will go toward a mortgage, car payments, clothes, alimony, cable, Scientology fees, insurance, summer camp, a vacation, health care, and maybe, just maybe, a retirement account. Oh, and a college fund. It's a good life, but not the high life. And, by the way, the people that I personally know who run businesses and make that kind of income easily work 14-hour days to make that happen. They have the pressure of people depending on them. They deal with many, many problems. They are stressed out. No one, with the exception of Scott Disick, just sits back and makes that money by doing absolutely nothing worthwhile.
Silly Myth #4: Tax incentives create jobs.
No, they don't. Most of the small-business owners I know laugh at the government's attempts to help them hire. A tax credit to hire someone is nice, but if we don't need the person, we're not going to hire him just because a credit is offered. Here's why: I still have to pay the employee's salary and benefits. So I'm still significantly out of pocket, despite the tax credit. Even Jared Bernstein, a former economic adviser to the President, admits that there's no hard data to support that tax incentives create jobs. The government can't make me create a job for someone. Only more demand can do that. Or a request from my largest customer to hire his kid for the summer.
Silly Myth #5: All government incentives are useless.
That's not true either. Some work. Extending the popular Section 179 deduction that allows smaller companies to immediately write off the purchase of certain capital equipment and investments is helpful. Credits for research and development really do spur research and development. Targeted tax relief in certain urban zones can attract businesses to build and invest. Easing of rules (like the "Quick App" for bond guarantees from the Small Business Administration) helps us get money faster.
Silly Myth #6: The Senate's Small Business Jobs and Tax Relief Act will create 990,592 new jobs.
Not 990,593? What about that poor guy? I've done my own calculations, and I think it will actually be 990,589. So there! I mean, really, is anyone believing this data? Our government cannot even balance its own budget by a trillion dollars, but it can predict the number of new jobs that would be created by a proposed legislation to that degree of certitude? Wow! The fact is that small-business owners don't believe most of the predictions provided by the government (or its research organizations) any more than we believe that professional athletes are braver than the average guy. We hear about the upcoming "taxmageddon" and the "fiscal cliff," and we know that the people predicting disaster were the same people who predicted that last summer's credit downgrade of U.S. debt would be calamitous. (It wasn't.) And where were they prior to the 2008 financial meltdown? The latest financial downturn has taught small businesses that those supersmart Ivy League guys on Wall Street, in corporate boardrooms, and in Washington policy think tanks still don't have a clue.
Silly Myth #7: The government can stimulate the economy and create jobs.
We don't believe that either. We've seen the Fed ease money and keep interest rates at near zero over the past few years. We've watched our President spend trillions on stimulus and tax incentives. We've let cats run our towns. And all we've got to show for it is an anemic two percent growth rate and a couple of new democracies in the Middle East. Big whoops. Don't misinterpret me--governments can help get the ball rolling. The Marshall Plan began an economic recovery after World War II. Johnson's Great Society (not to mention the Vietnam War) helped spur growth. Reagan's defense buildup in the wake of Soviet aggression was one part of his economic recovery. A stable tax system and well-managed Federal Reserve is critical. But the government can only do so much. Merger-and-acquisition activity was a big part of the stock market explosion during Reagan's administration. A dot-com boom fueled the economy under Clinton. A housing surge helped Bush. A lot of things could happen that would make our next President seem like an economic genius. So small-business owners don't look to the government for answers. We try to avoid dealing with the government whenever possible.
I hope this clears up a few myths about us. Now, if you don't mind, I have some work to do. I've got exactly 990,592 new jobs to start creating, and that's not going to happen overnight!
GENE MARKS | Columnist | Owner, Marks Group
Gene Marks is a columnist, author, and small-business owner. He oversees the Marks Group, a 10-person technology consultancy to small and medium-size businesses. A certified public accountant, Marks has also worked in the entrepreneurial services arm of KPMG. He writes for The New York Times, Forbes, and The Huffington Post.