Problems & Priorities report finds that taxes, inflation and red tape are the biggest obstacles.
What’s the most important problem your small business is facing?
Over the past 30 years, our Problems & Priorities report has found that taxes, inflation, and the cost of regulations and red tape plague you year after year.
For small businesses, the tax problem is more complicated—and insidious—than many politicians realize. It comprises not only the amount and percentage of taxes levied, but also the resources required to prepare and file them. The Taxpayer Advocate Service, a division of the IRS, estimates that Americans spend an estimated 6.1 billion hours filling out tax forms each year, and a growing number must hire professional help.
There are also hidden taxes. Obamacare is loaded with taxes disguised as penalties in addition to taxes on medical equipment. There are also taxes on capital gains and increased taxes on the incomes of business owners unlucky enough to have made it “into range” of the tax rules. Taxes are essentially the direct confiscation of profits by the government. Profits are the major source of new capital to finance the growth of small business, which employs about half of the nation’s private sector. The government’s current tax policies are hindering small business growth.
And then there are regulations, which force small businesses to spend money and time on mandated activities, such as filling out paperwork and keeping records. Regulations are spewing out of Washington and lower levels of government at a record pace, which makes it difficult for small businesses to keep track of and comply with new rules.
Additionally, the Obama administration supports a minimum wage increase, which will not only raise small business costs and consumer prices, but also reduce opportunities for the less skilled and the young. A neighborhood store that employs 10 minimum wage workers for 2,000 hours of work each per year will see labor costs rise by $20,000 for every dollar increase in the minimum wage. The much-discussed $15 minimum wage would add about $160,000 to labor costs (not including additional costs such as state taxes and FICA). That’s not chump change.
Is there any relief in sight? If past is prologue, it’s possible. In the 1990s, tax revenues grew so quickly that we ran budget surpluses. That seems like a better route to follow, but it’s not clear that the administration buys into that. For now, the president believes the way to get revenue is to raise tax rates on those who work and invest in the economy.
Winston Churchill once said that “for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
To jolt our nation’s small businesses out of their economic doldrums, our government needs to step out of the proverbial bucket and stop trying to lift itself up by the handle.