Why both Obama and Romney are wrong on small tech business
alleyinteractive.com
alleyinteractive.com
As someone who has cofounded both a tech company and a traditional bricks-and-mortar small business, I can assure you that the traditional small business has slogged through copious red tape. It's true that much of it is state and local, rather than federal, but that's small comfort.
You might think that a reasonably smart person should be able to independently figure out how to pay a dozen employees without accidentally breaking the law and getting fined. You would be wrong.
The payroll processing industry doesn't exist because it's hard to write checks. They exist because it's absurdly difficult for a non-specialist to be compliant without expending disproportionate effort.
Please, Matt, speak to someone trying to run a business in the "more conventional trades" and see how government regulations hurt them.
That is if you can find any such small businesses in the areas that federal government regulation have killed off. Just take banks for example: in the last 4 years, the federal government has basically made it impossible for any bank with less than $100,000,000 in deposits to exist. New regulations essentially require 40+ hours per week to keep up with the "minor nuisance paperwork." That's simply not doable if you're a small bank, which is why you're seeing all of them gobbled up or closing down.
Obviously, this has dramatic affects on the ancillary small businesses that made their living serving those small banks.
Just because the harm isn't visible to you doesn't mean it doesn't exist.
You discount an argument as anecdotal and not applicable and then support your argument with another anecdote.
1. OP says government regulation does not harm small business. Full stop. Blanket statement.
2. I point out that very recently enacted legislation has, in fact, killed off nearly every small business in an industry.
3. Are you arguing that the OP's point is still valid? Or that banking is some strange exception to the general rule? I genuinely don't understand the point you're trying to make. (Note I will agree with you that writing laws to fit every possible exception is not possible or advisable. Is that your only qualm with my point?)
Obama and Romney are wrong on pretty much everything, but one of them will still get elected. So what's the point of rubbing it in?
Politics is the art of ameliorating numerous constituencies. In other words, discrete bribery. No "right answer" can come from that.
For the right answers, you need a leader, not a politician. We haven't had one of those in a very long time. They're not terribly electable.
No, not really. Obama and Romney are both right on just about everything; most of those things we give no thought to because we settled them centuries ago. There is a small space of matters on which they disagree, and on most of those issues one of them is closer to right than the other. Then there is another small sliver of issues, more important than the other sliver, about which both are wrong and/or apathetic.
My out-there proposal for a way a president could actually effect change: interest-free federal student loans for graduates with ABET-accredited engineering and engineering-tech degrees (or even "negative interest" depending on how much you want to push it). Or, just pass the Fundamentals of Engineering exam to get your interest waived.
Someone could do the math to figure out if the additional tax income from higher-earning tech salaries would make up for the lost interest income, but I'm guessing it'd even out pretty soon.
Start encouraging students in all fields into tech-heavier majors. Want to work in the fashion industry? Industrial Engineering should be your start. Want to become a business executive? Get a Math or Systems Engineering degree before you head to B-school. Even future lawyers would be better served with a degree in Physics rather than cranking out another Political Science graduate.
Most businesses are set up as S corp or LLC to avoid our broken corporate tax system/double taxation. The high corporate tax rate obviously encourages entrepreneurs to pass profits through to themselves rather than keep it in the business and grow the company.
In any case, investors don't want losses to flow through to them. They want losses carried forward to reduce the company's tax liabilty in the future.
This is a seriously flawed statement. There are a rather large number, and worse, not one comprehensive list. It also matters what they classify you as. There is a current case where a airport is classified as a mining operation because they are going to sell the coal removed when they put in a new runway. Doing a kickstarter and buying materials from overseas, good luck. We ignore most of them up until the point we are made aware by a man with a badge or a lawyer.
Well, I know a fair amount of farmers that are scared about Jan 1, if the estate tax reverts and some startups should be too. http://www.mtpioneer.com/2012-January-Estate-Taxes.html
2) The avoidance of C-corps has to do with double taxation and high-marginal rates on the second level of taxation. So, again, this analysis is flawed. The absence of C-corps is evidence that the tax rate/s in fact makes them un-economic and thus illogical to bring into existence.
3) Small businesses are hurt by both excesses of credit (which lead to asset bubbles and COGS inflation) as well as localized shortages of credit. There is currently not an aggregate credit shortage (corporate balance sheets are stuffed with cash). Seperation of retail from investment banking would help with the localized issues around credit to small businesses (because it would eliminate cross-product subsidies, and more rational pricing structures for debt).
4) This would actually support a public heathcare system in its entirety. Which is legitimately, not an idea either side has addressed. But its also arguably a feedback loop on the tax issue: if it goes away somebody has to pay for it. This is likely to show-up in the tax bill if the service is nationalized, for example.
These are all good points to raise, but would just propose to have a little more background added for color. Politicians and voters are almost always out-informed on these issues by special interests. But because the latter elects the former, they only need to communicate at levels of "Mininimum Viable" product. Which is a great innefficiency :/
In general, there actually aren't a lot of federal regulations that affect small businesses.
Which is on its face a sort of bizarre comment. It is "in general" the job of Congress to regulate interstate commerce / communications / banking etc. So, positing that this is "in general" irrelevant is indicative of much more than a localized flaw in his argument, becaue all of a sudden his 2nd point is about taxes and legal structure, and his 3rd point is about credit (see above: congress set taxes and regulates banks).
A strawman shorthand for a specific type of fundamental mis-characterization: Asserting up a hopeless argument/position (that nobody believes) to reject it out of hand (for implausibility). Here, the initial flaw has cascading relevance to the next several points made, so its not just a pedantic or rhetorical gesture to highlight it.
2) The avoidance of C-corps has to do with double taxation and
high-marginal rates on the second level of taxation. So, again,
this analysis is flawed. The absence of C-corps is evidence that
the tax rate/s in fact makes them un-economic and thus illogical
to bring into existence.
Obama's business tax blueprint explicitly addresses this:
(iii) Distorting the form of businesses.
Business may be organized under a variety of different forms,
including C-corporations, S-corporations, partnerships, and
sole-proprietorships. These organizational forms offer varying
legal, regulatory, and tax treatments. The primary difference in
tax treatment between C-corporations, on the one hand, and
S-corporations, partnerships, and sole-proprietorships, on the
other, is applicability of the corporate income tax. C-corporations
are subject to the corporate tax, while pass-through entities are
not.
The combined effect of this varying tax treatment has contributed
to a lower effective tax rate for pass-through entities relative to
C-corporations. The effective marginal tax rate on new investment
by C-corporations is now 32.3 percent, while the effective marginal
tax rate on new investment by passthrough businesses 26.4
percent.
...
The ability of large pass-through entities to take advantage of
preferential tax treatment has placed businesses organizing as
C-corporations at a disadvantage. By allowing large pass-through
entities preferential treatment, the tax code distorts choices of
organizational form, which can lead to losses in economic efficiency;
business managers should make choices about organizational form
based on criteria other than tax treatment.
...
Reduce the corporate tax rate from 35 percent to 28 percent.
This reduction in the rate would put the United States in line with
other advanced countries, help encourage greater investment in the
United States, and reduce the tax-related economic distortions
discussed above.