How Entrepreneurs Would Resolve the Fiscal Cliff
The clock continues to tick down to January 1, the date on which the country is scheduled to go hurtling off the so-called fiscal cliff as severe tax increases and spending cuts kick in.
But by many accounts, there's reason for optimism. A Friday meeting between President Obama and congressional leaders left both sides confident of reaching a solution in time. And last week, the CEOs of some of the country's biggest corporations made progress in a meeting with Obama where they discussed how allowing the Bush tax cuts to expire and gutting government spending might impact the business world.
However, among the people who have yet to be consulted about what should be done--and who are most likely to feel the negative impacts of a dive off the cliff--are small business owners. How will a proposed $500 billion in defense spending cuts over the next 10 years impact small defense contractors? If the Alternative Minimum Tax is reinstated, and taxes increase an average of $2,800 per household, how will that impact consumer spending?
We couldn't help but wonder what ideas and opinions small business owners might have brought to the table had they been in on these meetings. Here's what they had to say:
Eric Blinderman, founder of Mas Farmhouse and Mas La Grillade
"I'll put it simply: If the income I'm generating from my businesses isn't meeting my expenses, I have two options, neither of which are mutually exclusive. I will seek to increase my income and decrease my expenses. I will not do only one. Any solution put on the table has to both generate revenue and cut expenses. Economic growth has to continue, and anyone who presumes that irrational drastic inaction is going to shock us into more sensible policy is a complete and utter fool."
Paul Metselaar, CEO of Ovation Travel
"I believe CEOs, as well as other high-income folks, need to pay more and do their fair share to come up with this grand bargain. The government needs revenue to survive, and we have the lowest taxes since the Truman administration. It's not sustainable. I don't want my taxes to go up, but realistically, I don't think there are enough deductions we can eliminate to get the kind of revenues we need to significantly impact the deficit. I think rates will have to go up, and Republicans will just have to cave on that."
John Kunkel, CEO of 50 Eggs
"Nothing will slow the growth of small business like Obamacare being rolled out while taxes are raised. Most small businesses are S Corporations, meaning everything passes through to me in my personal tax return. While I show that revenue as income, all of it has really been rolled back into my business. There's plenty of money in the system already. It's just being misspent. I was encouraged to hear Mitt Romney wanted to go through each program and see if it was functioning properly. I think that's a great place to start. Before we raise taxes and put further burden on the economy, are we using the money we have correctly? It looks like Obama's digging his heels in to raise taxes, and I think that's dangerous."
Amy Baxter, CEO of MMJ Labs
"One of the people who works for me has a husband in construction. The day after Obama was elected, her husband's boss cut everyone's salary 30%, 'because it's going to get rough.' This apocalyptic reaction could bring down the economy in an ignorant form of self-fulfilling prophecy. A quick, balanced resolution to the fiscal cliff issue, including taxing the wealthy at rates already demonstrated to be tolerated by our economy, may help stop some of this behavior. Last time Obama was elected, it seemed some politicians wanted to intentionally stall the economy to get back in the White House and prove that their policies were better. If that same partisan agenda dominates now, I will begin to share some of the apocalyptic fear. We should be better than that."
Dana Marlowe, principal partner of Accessibility Partners
"As a government contractor, my company relies on these projects that the fiscal cliff would be cutting. I believe the parties can compromise by implementing serious tax reform and an overhaul of the Social Security and Medicare systems. I agree with Obama's general plan to have $2.50 in spending cuts for every dollar of increased revenue, but I believe increasing tax rates on people making more than $250,000 is too low a threshold. That $250,000 isn't all income to the family. It's much less than that, considering small businesses also require working capital, inventory, and, these days, rainy day money. I think it should be agreeable to all to increase that threshold to $500,000 per family, which wouldn't harm businesses, but would still ask the top percent of wealthy to contribute more."
Bob Bentz, president of Advanced Telecom Services
"I don't envy the president on this one. He's going to be severely criticized no matter what is negotiated regarding the Bush-era tax cuts. I favor a gradual reduction of the tax cuts over the next three years. Eliminating them entirely is too serious a blow to the economy, just when the housing market appears to be getting stronger. The tax code also needs to be simplified and loopholes closed, because at the end of the day wealthy people do pay less, percentage-wise, than the middle class."
Cameron Keng, founder of Autotax.me
"We must take the leap off the fiscal cliff! Everyone forgets that our current tax rates are some of the lowest in American history. I can't say I love paying more taxes, but we need to make a decision: either accept less help and fend for ourselves or collectively tighten our purse-strings by accepting higher taxes. Social security is always in a state of ruin. We can't afford to continue the 2% reduction in payroll taxes without jeopardizing the entire program as a whole. "
Nick Balletta, CEO of TalkPoint
"The fiscal cliff is a self-inflicted wound that is the direct by-product of a lack of leadership in Washington. Here is what needs to happen: Tax rates need to be cut, flattened, or at a minimum extended permanently. Capital gains tax should be cut to 10% to drive investment for the next four years. Create a two-year moratorium on taxes on repatriated funds that U.S. corporations have sitting abroad. We need that capital working in the U.S."
Julie Haley, CEO of Edge Solutions
"The $671 billion in automatic cuts must be averted, because that would bring too much austerity, too fast. The president and Congress must make a grand bargain. First, provide continued tax relief for those making up to $250,000 a year, which will help 98% of small businesses (and it also provides relief to the upper 2% on their taxes up to $250,000). As part of the deal, flatten and cut top corporate tax rates, and at the same time, close some loopholes for top wage earners. Definitely close the loophole that allows American companies to set up shell companies abroad. This is a total scam. If my little company can pay its taxes, so can theirs. If we lower the corporate tax rate to at least 25%, it would make it more palatable."
Theresa Kern, president of MA Steel Erectors
"I'm most concerned about [the president and Congress] not reinstating the Bush tax cuts. In construction, I have a bank that I have to satisfy, and I also have a bonding company that I have to satisfy. Because we've had four or five very tough years, the bank and the bonding company have said if I make money at the end of the year, it has to remain in the business. I don't have a problem with that, except now, if the Bush tax cuts expire, I'm going to have to pay taxes on money I can't even take out of the business. I also think there should be across-the-board spending cuts, but not to programs that create jobs, like transportation and energy projects. Those programs actually increase the tax base, because they put more people to work."
What do you think should be done by January 1?