Absent from the rancorous Federal debate surrounding fiscal cliffs, imposing higher income tax rates and Obama care, begs the question; what will these social entitlements actually cost us taxpayers and how much can we really afford to spend on them?
Today many small businesses cannot afford to provide for both a meaningful living wage and healthcare costs for their employees; the reason is a matter of basic math. Business margins do not allow for it. It’s simple economics really; the dollars companies would have to pay out will exceed the dollars that their businesses can generate back in. The result, they would be out of business!
It is very clear, however, that most politicians in Washington DC have no base of knowledge in what it takes to start and run a business. After all, most have never started a business nor worked in the private sector.
The Obama administration's continuous disdain for capitalism clearly explains why America is currently suffering one of the lowest recorded periods of new small business growth created in decades. To make matters worse, higher federal taxes and the oppressive regulations contained in Obama Care will continue to discourage small business expansion, which is crucial to repairing the economic meltdown our nation is experiencing.
For example, let’s say a business has created jobs for 450 people, providing the financial stability for those employees and their families. Soon due to Obama care, this business will now be forced to pay the government a punitive penalty of $2,000 for every one of those employees, beyond 50 employees. This new penalty will now cost the business owners an additional $800,000.00, in essence because the business successfully employs hundreds of people. Continuing with our example, if a well-run business, realizes a one million dollar ($1,000,000.00) profit from their hard work, they will no longer retain the benefit of those profits, now the government will. The business won’t be able to reinvest their profit directly back into their business. They won’t restock supplies, they won’t make repairs or purchase new equipment and most important to our nation’s economy; they won’t hire new employees; rather they will most likely be forced to cut employees.
In the Obama administrations latest -one two punch- directed at small business, higher taxation and punitive mandates imposed by Obama care will trigger a disastrous financial cycle, an economic collapsing domino effect if you will. When graduated effectual federal income tax rates of 29.5% for the first $400,000.00 of profit and secondary tax rates of 39.6% for the remaining profit trigger a $357,600.00. Federal income tax bill combined with Illinois 6.9%, or another $69,900.00.
Our business owner's total costs now look something like this; $800,000.00 (in Obama care) $357,600.00 (in federal tax bills) and $69,900.00 (in Illinois tax bill). Our business now owes Uncle Sam $1,227,500.00 in combined tax and punitive Obama care penalties. Our business just plummeted from profitability to a $227,500.00 loss, literally overnight!
Considering that small business employs nearly 90 percent of our nation’s work force, common sense would suggest that tax increases and government regulation hostile in its intent towards small business, is not good policy. The Obama administrations goal should be to create more jobs for millions of unemployed Americans and to stimulate and grow our nation’s economy, contrary this administrations newly enacted policy is how you would proceed if your intent were to strangle it.
Apparently in Washington DC, common sense is not so common.
Sean M. Morrison is a conservative businessman; he is the Republican Committeeman of Palos Township. He lives in Palos Park with his wife Lora and their two young children