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Start Your Business Now – Here Is Why
If you have ever thought about starting your own business or taking it up a notch or three now is the time.
You may have heard the Administration is going to ride herd on the largest overall tax increase in the history of the country, but you may have not seen the numbers in black and white. Here they are.
- The 10% bracket will increase to 15%.
- The 25% bracket will increase to 28%.
- The 28% bracket will increase to 31%.
- The 33% bracket will increase to 36%.
- The 35% bracket will increase to 39.6%.
What this means is this.
- The 10% bracket will increase to 15%… a tax burden hike of 50%.
- The 25% bracket will increase to 28%… a tax burden hike of 12%.
- The 28% bracket will increase to 31%… a tax burden hike of 10.7%.
- The 33% bracket will increase to 36%… a tax burden hike of 9.1%.
- The 35% bracket will increase to 39.6%… a tax burden hike of 13.1%.
Capital Gains Taxes are due to go up by 50%. This is going to hurt all business investment and help kill any new job creation and drive manufacturing overseas even more.
Taxes on dividends are due to go up by 100%. This is going to hurt retired people the most. It is now open season on Grandparents. Politicians are not giving them the choice of what cat food they are going to buy to eat. Way to go. In essence, this is going to cut many retirees income in half.
Death Taxes or Survivor Taxes are coming back and they will take 50% of what people have worked for and have already paid taxes on all of their lives. This will force people to sell family farms and businesses.
Food Stamps As Used By One In Six Americans. This figure is up by 50% since last year!
Medical Insurance Premiums have gone up 14.4% this year already since they passed the new Health Care bill and that pace could go up significantly.
OK, did anyone really believe it when they said that we can insure an extra 30 million people for free?
The new Financial Reform bill will could drive up fees on banking by over a $100 per year for each account you have.
They are floating an idea to tax your 401k and other retirement accounts and there are dozens of pieces of legislation that was passed that no one read that could add an additional 5% to the cost of doing business for each and every business out there.
Just one of which is that all purchases that total over $600 in a year require a 1099 to be issued. This may not seem like much, but it will create hundreds of millions of them that have to be tracked and issued by businesses. This includes if you buy $50 worth of office supplies at Office Max. You will now have to issue Office Max a 1099. This is going to cost hundreds of millions of dollars to follow up to issue and track. For instance Office Max now has to handle, file, and store them.
There are at least another four dozen seemingly innocuous rules like this coming down the pike that are not being talked about.
Well, by now you are may be saying…
“Anderson, with all of this Doom and Gloom and Stupidity heading our way, why would I want to start a business now or expand what I have? Are you nuts?”
Here is my answer. This is just my own musings about the ramifications here and of course you should always seek appropriate professional advice.
If you are going to pull money out of investment to put in your businesses, the tax ramifications of doing that now could be half of what they are if you wait until next year. Or to put it another way, you could pay double to take out your own money next year.
If you have not figured this out, job security is a thing of the past. It simply does not exist unless you are with the Government and even that I will predict is soon to be a thing of the past.
So, at least by working for yourself, you have some control over it, even if the Government is doing everything possible to make it harder on small businesses at the moment.
Starting Now Will Give You A Distinct Advantage
But, that being said, while this may scare off a lot of people, those who do get started now are going to have a distinct advantage over those who wait until next year.
While I have said this before many, many times, every single politician out there knows that raising taxes of any kind kills off jobs and hurts the economy.
This has been proven thousands of times over thousands of years. And several dozen times in the past 100 years when it comes to income taxes. Remember, we halve only had income tax for less than 100 years and Woodrow Wilson only got that passed by lying and saying it was temporary.
If any politician tells you raising taxes raises revenue they are either lying to you, which is normally the case, or they are so ignorant and stupid that they have no business being in office in the first place. 90% of the time they are simply lying to you. It is simply about control, power, or egos most of the time.
If they truly wanted to see the Economy take off, they would put a moratorium on taxes for even just six months and then implement a flat tax of 22% after that and they would see the Economy explode and people being hired right and left and they would more than make up for the taxes in what ensued afterward.
Do I expect them to do that? No, because then everyone could see what they know to be true and they would be run out on a rail every time they tried out the trotted out the tired old Tax The Rich line. Besides, that would make common sense and that is simply forbidden in Washington and in most state capitals. Add to that the controlling taxes equals power and we will probably never see it happen even though in countries where it is effect their economies are on a roll and are stable. Think Hong Kong, Singapore, and Switzerland.
That being said, you really do not want to wait until next year to start your business for all of the above reasons. And lord knows what red tape you are going to have to face then.
On another note, you are going to want to out source as much of what you do as you possibly can. As of now because of what has been done in DC, employees are a liability plain and simple. They have made them that way and yet they are whining about companies not hiring. Just the new Health Care implications alone are enough not to hire people.
So, the answer is you hire contractors whenever possible. More and more companies are going to be doing this. Which brings up even more opportunity for you as a small business. They will hire contractors, but no one in their right mind is going to hire and employee if they don’t have to.
Does that make sense? I hope so, because that is what is going on and will continue to happen for the foreseeable future.
This means they can pay even a higher amount to outside contractors than they can to employees because of all of the extra baggage that goes along with an employee. So they can offer pay and extra 25% more to a contractor instead of an employee and still come out way ahead of the game financially.
As I have said before, where there is Chaos, there is Opportunity!
The one thing that you want to verify with your attorney or accountant is that it appears that they have killed off the sole proprietor ship. It appears that a corporation or LLC is the way to go in setting up your business unless you want to lose your shirt in extra taxes paid out.
It is not all doom and gloom. Hopefully the people will realize that the bone heads in DC do not have a clue and will give them a boot in November and perhaps, and I do say perhaps, that if the Republicans do control the Congress like back when Clinton was in office, the President will be forced to move from the radical left toward the center and actually quit hurting the economy. But, don’t count on many of the pundits are saying.
At the worst though, they won’t be able to pass anymore laws that are going to hurt the economy like they already have. Bottle necks are GREAT when it comes to DC.
Think about it. Don’t we truly have enough laws and red tape on the books now? Do we really and truly need anymore for us to function on a daily basis? I don’t think so.
Just make sure that you control the things you can control on your own and be smart about it.
Believe it or not, while they have done their best to screw things up and are doing a bang up job I might add…LOL you can still do really well in this environment if you are a little bit bold and smart.
Go out there and get your business started or get ready to get it in high gear now. There will be opportunity coming your way.
Andrew “Easy” Anderson