I'm a small business owner and I make less than $60,000 a year.

[geardaddy]

Last edited Fri Oct 12, 2012, 01:38 PM - Edit history (1)

I'm a sole-proprietor and have to pay my own healthcare. I wish the RMoney/Lyin' team would shut up about small businesses. They don't know shit.

Edited to add: And my pay fluctuates all over the damn place. I'm taking jobs where I got paid the same rate as 10-15 years ago.

[Sekhmets Daughter]

1. They only think of the Trump businesses as small

Trump makes sure none of his companies ever has more than 499 employees, thus he qualifies as a "small" business....

[madokie]

3. Thats what Joe said last night

to them they think the hedge fund managers are the small business owners, something to that effect

[geardaddy]

4. Yep, I loved it when he said that!

[JaneyVee]

54. The average small business owner makes between 40 & 70,000/yr.

http://smallbusiness.chron.com/average-income-small-business-owners-5189.html

[lumberjack_jeff]

2. Me too. Obamacare is important to my business. Tax rates are not. n/t

[geardaddy]

5. Exactly. n/t

[HopeHoops]

6. Agreed. I ran my own business for three years. It was more work in one day...

... than either of them have done in their lifetimes.

[geardaddy]

12. Yep, straight up, HH.

[wildeyed]

7. Wish I could rec this twice!

I also own a small business. The biggest problem I face is insurance companies and their ridiculous premium hikes. I am not a sole proprietor. We do have full time employees. Unlike big business, I actually care about the people who work for me and feel that I have some responsibility to them. I try to provide health coverage, but every year we have to reduce what we can afford to offer. Obamacare is going help with this problem Politicians all TALK about how they want to help small business, but this is one of the few times I have seen concrete action.

Another, off topic, thing that is funny is how much the Reps bitch about over-taxation of small business but are either completely disingenuous or completely don't understand the different ways you can structure a business and how much lower business and capital gains taxes are than personal income tax. Conservatives HATE arguing with me on this topic

[geardaddy]

8. Thanks!

[LeeM]

20. Good points

I am a partner in a small business. Am I the only one who sees that adding an employee reduces the (end of year) corporate profit, thereby lowering my share of the profit and tax exposure? I'll be happy to pay an extra 4% on any yearly salary (+distribution) that exceeds $250k, much less $1M, if we are ever that successful.

[Loudestlib]

21. Exactly

If I can chose between taxes or raising the wages of an employee. I'm going to pick the employee. I think most people would. Wages are the biggest thing holding our economy back.

[wildeyed]

53. You could also reinvest in infrastructure and depreciate the cost over a number of years.

People also don't seem to understand the difference between and S corp and a C corp. If your business is an S corp, then it is a pass through entity. Any profit that passes through to you will be taxed as income. Because it IS income. This is not some nefarious government plot to rob your business of its profits. It is plain ole income tax, just like other citizens pay. If you want to accumulate money in the business and have it taxed as a lower corporate rate (or not at all if you invest appropriately in infrastructure), then structure it as a C. Even years when we paid business tax and then gave ourselves a bonus as a draw, it STILL ends up cheaper than paying straight up income tax, but to the rightwing crazies it is DOUBLE TAXATION, oh the horror! People really don't seem to understand these simple fact and the rightwing takes advantage.

[angstlessk]

23. I rec'd it for you...I too ran a small business..and my hourly pay was less then when

I was employed, because of the hours I worked...about 14 per day!

[ChazII]

62. Recommending it for you. Okay

for me as well.

[Pyrzqxgl]

9. I've owned my own small business for over 45 years & all I can say is me too.

These guys don't have any concept about what running a small business that just gets by is all about.

[Cracklin Charlie]

10. Same here

And nobody talks about the amount of money that I pay for insurance of all kinds. The insurance companies are the true job killers.

[geardaddy]

14. Exactly!

My health insurance keeps going up, but my wage rate fluctuates all over the damn place.

[MANative]

52. Ding Ding Ding Ding Ding!

We have a winner! Truer words were never spoken.

[byronius]

11. Right there, absolutely, that's me. I f**king hate health insurance companies.

One of my biggest expenses, and every year they jack it up and lower the benefits.

Stench and SteakBaby need to get off the damned stage.

[Botany]

13. Same here ..... I make a little more but the idea that I am making >$250,00/yr ...

.... is laughable and BTW if I was I could find a way to make less and put the rest back into
the biz ...... that is why there are accountants.

[geardaddy]

15. Bingo!

Fuck that shit. I'm basically living hand to mouth.

[Botany]

19. this year has been much much better and the economy is turning around but ....

.... for Ryan and Romney to talk about small business owners being hit with
increased taxes is a joke because that is about people who make >$250,000
in personal income ...... now a small business might gross that but that does not
mean that the owner of the business is making that much.

Gross income - expenses = net profit And from that net profit the business can
pay the owner(s) of the business.

[geardaddy]

25. I am actually doing better this past year and a half

but I'm still not where I was a few years ago.

[Lone_Star_Dem]

16. Small business owner here, too.

The talking points of the Republicans don't resonate with me. They're so far off on what I go through on a daily basis, I often think it's unreal any one is listening to them.

[geardaddy]

26. Thank you for adding that.

I agree...they are so out of touch on this.

[Curmudgeoness]

17. Most "small business owners" make less than $100,000.

I have worked for small businesses my whole life, and none of the owners were what anyone would call wealthy. They were more often than not comfortably in the middle class, but I truly do not know how many small business owners who are making millions. Which leads me to wonder why so many of them fall for the Republican spin.

[Swede Atlanta]

18. Bingo....

The GOP definition of a "small" business is not based on annual revenue, number of employees, etc. They base it on the number of owners. So, according to their definition, Koch Industries, 84% of which is owned by Charles and David Koch, is a "small business" even though it is the second largest privately held business in the U.S. according to Forbes magazine in 2011.

You are correct. They don't think about the people running a 10-table sandwich shop or a custom upholstery business. They are thinking "big" in terms of these huge corporations owned by others in the 1%.

Unfortunately the Democrats never, well I should say seldom, call them out on this.

Look, I work for a large multi-national company but I realize that the majority of jobs in this country are in "small businesses". Small businesses need an environment in which to thrive. We need to keep government intrusion into their affairs at a minimum while not sacrificing public and consumer safety and security. We need to find ways to foster innovation in these companies. We need to ensure that, subject to their business plans, these companies can access capital at a reasonable cost.

Geardaddy....good for you with your own business. I wish you the very best.

As a colon cancer survivor I consider myself lucky to have employer-sponsored health insurance. And the amount I contribute every month is a pittance compared to what I would have to pay if I were left to my own devices and had to find coverage on the open private market.

[Risen Demon]

22. Yes. Thank you.

And Biden called them out on that too. Saying to Ryan that him and his ilk consider hedge fund managers "small business" owners. In reality, hedge fund managers contribute as much to society as a cockroach.

[raouldukelives]

55. Hey now, cockroaches at least serve a purpose.

I'd rate them far higher than a hedge fund manager on the contribution to the betterment of the world meter. Heck, they even register on the positive side of it unlike anyone involved with Wall St.

[geardaddy]

24. Thank you for pointing that out.

Excellent point.

[geardaddy]

27. Thank you.

I'm a kidney transplant recipient, so my insurance is more expensive than most. I wish you all the best with your health, I know how tough it is.

[A Simple Game]

28. The small business administration has a table that lists most small businesses

and their revenue and number of employee limits. After a quick look it appears other than most farms, a small business can be very large by most standards. Just a warning: the pdf is quite large.

below is the link to: U. S. Small Business Administration Table of Small Business Size Standards
http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf

Quite an eye opener.

[Doremus]

29. Posting in solidarity with my fellow small biz owners

Sole proprietor, living hand to mouth like so many.

Eddie and Rmoney can both shove it where the sun don't shine.

[geardaddy]

32. Thanks!

Solidarity brother!

[progressoid]

30. Me too. I'm in my 12th year.

I WISH I was making what I was making 10 years ago.

[Ikonoklast]

31. Amen, brother.

http://www.democraticunderground.com/?com=view_post&forum=1002&pid=1526164

[geardaddy]

33. Thanks.

And thanks for your post in the other convo.

[Sgent]

34. The tax rates can be an issue

in businesses that are trying to expand, especially those that are capital intensive. Take a small factory owned by an individual taxed as an S corp or partnership / sole proprietor (LLC):

Revenue: 10,000,000
Expenses 9,000,000
Income: 1,000,000

Taxes: 400,000

Income: 600,000

If the owner wants to draw a 150,000 salary, that means the business is limited to 450,000 to re-invest into the business (new machinery, increase in inventories, working capital, etc.).

In much of Europe and Canda the same business would look like:

Income: 1,000,000

Taxes: 150,000

Amount available for Owner Income & Reinvestment: 850,000
- Owner Income: -250,000 (enough to cover the personal tax rates)
____________
600,000 available to re-invest in the company.

The increase in taxes also means that the cost of capital increases, so payoff projections have to be higher.

[geardaddy]

38. Link?

[Sgent]

48. I'm not sure what you mean by link

I'm an accountant -- the above is a hypothetical, but does in general mirror at least three companies I work with, and many others I'm aware of.

Its not an issue with two types of companies:

1) Those with mostly cash sales which are not required to use the accrual method, or have relatively small capital requirements (not in amount, but as a percentage of profit / income).
2) Those who aren't growing significantly.

The two provisio's above exclude most retail, professional, and similar operations. It is an issue most especially for manufacturers and other industrial operations -- and the longer the lead time from raw materials -> cash in the bank the worse the problem becomes.

It can be a real issue with a company that wants to grow significantly (from say local to regional, or regional to national). Less so that is maintaining status quo (presumably depreciation = investment or close).

[geardaddy]

49. I mean, link to comparative tax rates between the U.S., Canada, and Europe.

[Sgent]

57. Wikipedia starts well

http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

The corporate tax rates for Canada, Ireland, and the UK range from 10-24% or so. The individual marginal rate in the US is 35%, plus 3.8% on LLC's, plus 14% on the first 112,000 of income, plus state taxes.

Corporate income taxes in the US 35%, with a marginal rate as high as 39% plus state taxes. In addition, there is no capital gains rate inside of a C corp (although only an idiot for a tax planner would have an appreciating asset inside a C corp if they can help it).

I fully support a high marginal tax rate on personal income; however, the way our taxes are currently structured it makes it very expensive to re-invest profits back into your business.

I'm not sure how to solve this, but it is a problem with a certain sector of small business (bigger than mom and pop, smaller than something that could trade on the stock exchange).

[geardaddy]

66. OK, thanks for the link.

[dawg]

39. But the business will get a deduction for the new machinery ...

either through depreciation or direct write-off, thereby reducing the amount of income subject to tax. Income taxes are not a fixed cost. They only apply to profits, and with enough strategic re-investment in the business, income taxes can sometimes even be reduced to zero if that is really what the owner wants to do.

Most business owners, however, want to take profits from their businesses. And when they do, they owe income taxes on those profits. That's only fair.

[Sgent]

47. Someone in that level bracket

will be into AMT land most likely -- meaning they will get the deduction eventually -- over 16 - 40 years depending on they type of plant and equipment.

I agree (and the European / Canadian model allow for) that when profits are withdrawn, taxes should be paid. And I know that various accounting methods can be used to reduce the tax burden. But most businesses I know of do invest an amount (of varying levels) into their capital base so run afoul of the issues above for at least some problems.

I'm not sure what the answer is to allow for beneficial reinvestment, but there are issues with the way our tax code is currently structured.

[dawg]

50. Sec 179 expensing is fully allowable for AMT.

Most equipment can be written-off immediately using this provision. Most other equipment is depreciable over 5-10 years for both regular and AMT purposes. Only buildings and other infrastructure-type improvements carry the 16-40 year lives like what you mention.

I believe someone has mislead you a little about the provisions of the U.S. tax code.

Almost all truly small businesses qualify for immediate expensing of all their equipment purchases. It is only when you start getting into companies that take in more than ten million a year that it starts getting difficult. Even then, by using other provisions of the code, including accelerated depreciation, you can do fine.

High tax rates interfere with owner's enjoyment of their profits. That's pretty much it. If additional capital can be profitably employed, smart business owners will do so regardless of the tax rate. If you refuse to make an investment that would have given you a profit, that is the same as paying a 100% tax.

[Sgent]

56. Sec 179

is limited to section 1245 property and certain other personal property, same as most bonus depreciation, etc. It is not available for investment in plant, leasehold improvements, etc.

Its also limited to 179,000, which expires at the end of this year back down to 25,000 unless it is extended (which it probably will be in some fashion). In addition, if you put into service more than 560,000 it phases out.

In addition to all the above, you still have issues as I pointed out above if you invest in working capital, etc.

[dawg]

58. Section 1245 property includes machinery, equipment, vehicles, computers ...

essentially all the capital investments a small business needs to make other than the building.

Even leasehold improvements can, in many cases, be made to qualify for the Section 179 deduction if a thorough cost classification study is done. Also, as a practical matter, many businesses push the line and write-off much of those investments as "repairs" even though they should not do so if the functionality of the building has been enhanced.

When the 179 deduction reverts to 25,000, if that really happens, then smaller businesses will have a more difficult time investing in new capital. But even then, depreciable lives are short for most productive assets.

As for investing in "working capital", that is accounting jargon for accumulating cash (and sometimes extra inventory). Naturally, if the business is making enough money to accumulate significant amounts of cash, that it does not reinvest in equipment or personnel, taxes must be paid. It's nice to have lots of working capital, just like it's nice for an individual to have huge piles of spending money, but I don't think anyone thinks that is a legitimate reason to be spared from taxation.

The bottom line is this: the things you are complaining about relate to businesses that are not exactly what most people think of when you say "small" business. We're talking about companies doing $10 million or more in sales, buying more than $500K in equipment in a given year, and probably employing at least 50 or 60 people. Profitable businesses of this size can afford to pay their taxes.

[Sgent]

59. Working capital

importantly includes items such as inventory, work in progress, etc. which can be a significant use of cash in a manufacturing operation -- especially if you are looking to grow.

Like I've said repeatedly, this doesn't apply to many small businesses (even retail has a relatively short turnover -- or should), but some manufacturers it can take 12-18 months or longer from purchasing raw materials, paying for labor and other expenses of production, to final sale and receiving payment. If December 31 (or whatever their tax year) falls in that date, they will have to pay income taxes likely before selling the inventory.

[dawg]

60. Since we are mostly talking about relatively large businesses here ...

I'm a little low on sympathy, but I'm not entirely without sympathy because, even if you are pretty rich, it is no fun paying income tax on income that is actually sitting in inventory or uncollected accounts receivable. Most real small businesses qualify to use the cash basis (or some modification thereof) so it doesn't affect them. Midsize companies, like the ones we're talking about, do get hit when they are building inventories or they have large amounts of receivables on the books at year-end.

So I'm not totally unsympathetic.

On the other hand, I want to build my investments too. And if I receive wages, I have to pay income taxes on those wages, which makes it hard for me to have enough money left over to buy that Facebook stock that seemed like such a sweet deal (or that rental condo in Florida).

We have to pay our taxes before we can make further investments, whether as an individual or a business. The tax code does a pretty good job of providing exceptions for truly small businesses. Most larger businesses have line of credit arrangements, at historically low interest rates, to help with the timing differences they face. But larger businesses need to pay taxes on their income before building cash reserves or accumulating inventory. Otherwise, business owners could hoard cash inside their businesses and defer paying taxes indefinitely.

[Sgent]

63. I generally agree

I don't really think this applies to professional, retail / wholesale, etc.

Where it really hurts is manufacturing -- because remember you not only have to accrue the raw goods, but also the labor, manufacturing overhead, etc. as WIP. Especially if you have long lead times, this can really hurt.

I guess it also depends on your definition of a "small" business. A factory with 20 employees could easily hit the accrual requirements, and be pushed into this.

[kestrel91316]

35. I am a small business owner and I wish I made something even CLOSE to $60k.

[geardaddy]

37. That's gross. n/t

[matt819]

36. Absolutely right

The problem is that the SBA (I think it's the SBA) defines small business as one having fewer than 500 employees and sales up to $50 million. Or something like that. Then there's a description that addresses the number of partners in a limited liability partnership or members in a limited liability company. This is where small business can encompass the hedge funds that Joe Biden referred to last night.

So the more accurate description is the one Biden used, where 97% of small businesses earn less than $250,000. The liars and cheats insist on calling that remaining 3% "small businesses." That is what we in the reality-based community call BS.

[dawg]

40. The biggest problem for small business in America is .... big business.

Small businesses in this country have to compete against multi-national corporations with one hand tied behind their backs. The multinationals have numerous unfair advantages, and they exploit them ruthlessly. They don't want to compete on a level playing field, and thanks to our plutocratic system they don't have to.

[moondust]

41. And the Republican Party serves big business (and billioniares).

But big business and billionaires don't have nearly enough votes to win them an election so Republicans have to either pander specifically to small business for votes or pretend that all businesses are equal.

[geardaddy]

44. Excellent analysis.

[grantcart]

42. another small business owner in agreement

[geardaddy]

43. Solidarity GC!

[jmowreader]

45. Please stop being a sole proprietor

Change your form of business to either LLC or Subchapter S corporation. Someone suing a sole proprietor can go after his house; LLCs and S-corps separate your business and personal lives.

[geardaddy]

46. Technically I am an LLC now.

But I still have no employees.

[jmowreader]

65. Nothing technical about it

Even if it's just you, I'm glad you took steps to protect yourself.

[MANative]

51. You and I are in the same boat, friend.

I feel your pain, literally.

[geardaddy]

68. Thanks

Solidarity.

[GreenPartyVoter]

61. Single-person small business family here too. And yeah, hubby listened to the debate and said, "What

is he (Ryan) talking about? I don't pay that much in taxes!"

[Lydia Leftcoast]

64. Self-employed for 19 years (!)

I have to pay for my own healthcare too.

[geardaddy]

67. Thanks Lydia.

How's the hourly rate fairing in your business these days? Up, down, stagnant?

[Lydia Leftcoast]

70. Translators are usually paid by the word, not by the hour

Per-word rates are negotiated for each customer, and I'd say that they're either steady or down. However, with the strong yen, I'm actually making more with some customers' lowered rates than I did with higher rates and a weaker yen. In other words, x at 80 yen per dollar is worth more than x or even x+n at 135 yen per dollar.

[rucky]

69. At least Biden called 'em out on it.

You're a 97%-er

[savalez]

71. I'm right there with you!

The AHCA is going to help us tremendously.

[Cleita]

72. Republicans only talk about being friendly to small business.

They don't give a shit about you anymore than they do the homeless guy living on the street. It's only your vote they want because they know the global mega-corporations that they are really serving don't have enough votes to put them in office. They won't do anything for you once in office except solicit you for more campaign funds and votes the next time they are up for election. I watch this going on at a local level all the time. Some of these Republican politicians almost sound downright liberal when they are campaigning, yet when you look at their records they have done nothing for you, the small business and professional person.

[Blecht]

73. You are obviously not working hard enough,

or you're not very smart.

All it takes to make money hand over fist is brains and hard work. If you run a business and are not wealthy, you're a loser.

/Republican idiocy off

That's really what these guys (Romney and anybody else with an (R) next to their name) say. They insult people like you who work their asses off for not a lot of money -- you and people like you are the true job creators in this country.