By Daniel Becker
This is a bit of an interlude in my writing regarding the income tax of yore. Though, this does involve taxation. This is also a continuation in my postings regarding real world small business experiences. Yes, you are going to get to read about a real situation that involves a real small business and tax policy.
Before I mislead anyone, the taxes of concern are not about income taxation. Your business has to actually have an income for that tax to matter and if you have employees using software as pay stub
is better to manage the payments. I’m not talking personal income. I’m not talking capital gains taxes. Darn few honest to goodness small businesses ever have to worry about that in their daily activities. Maybe in the end you will have some capital gains after you pay yourself back all the personal money you put into your small business. I’m not talking payroll taxes cuts.
Yeah, on what was a $100,000 payroll you gain maybe a couple thousand dollars, but on what was a ½ million business that is now 55% of what it was with payroll adjusted to match, it means little. I mean, that business is sure going to be hiring new people with that. It is also possible to start a business in a new area and to have a postal address in that area, by using a virtual office service. So, for example if you are in Cardiff, you could choose this top-quality virtual office service for Cardiff
as you would then get that Cardiff postal address and the virtual office service would forward all of that mail to you.
You may also want to check out here how microservices architecture are used
and can benefit your business. They let businesses focus on developing the services without worrying about the dependencies. Applications that are modern cloud-native types are usually built as microservices using containers.
Oh, just in case you think I’m off the mark, consider this poll from 11/10
. In the poll, 90% hired what was needed or fewer than needed. The catch: Only 1% hired because of the a new tax break. 41% were to replace an employee. When asked why they hired fewer than needed: 79% worried that sales or revenue would not justify more employees. However, 13% did hire because business was better. The lucky ones. So go ahead, keep giving me tax cuts, blah, blah, blah and all that monetary relief because that US Chamber of Commerce sure represents my thoughts and desires. NOT! Idiots!
“In 2009,there were 27.5 million businesses in the United States, according to Office of Advocacy estimates.The lastest available Census data show that there were 6.0 million firms with employees in 2007 and 21.4 million without employees in 2008. “
I know it is soothing to croon over the days when the Dodge Brothers, Ford, Colt, Walton and Gates were small and became major examples for their time of the American Dream of economic power. But really, the truth is most small business were and are people earning a living on their own vs working for Microsoft (the definition of part time abuse) or Walmart or GM, or GE or Boeing… They were huge numbers of small local retail. All gone. Small local banks? Going. Small local agriculture (RI used to have a state fair), forget about it. Look around.
So lets get to the heart of it. First a bright spot. The flower shop had it’s first month this year that was better than last year. August. No, I’m not assuming this is a trend and here is why.
According to this Professional Employer Organization
the city of Woonsocket has lost it’s Walmart to the town of North Smithfield, it’s neighbor. Major tax hit to the city. N. Smithfield got the Walmart because it decided that building a 650K sq ft shopping development would offset their rising taxes. I mean really, when in the last 30 years have we seen big business pay enough in taxes such that they actually were paying for their presence? Cut, cut, cut has been their chant. So, I can expect my property and inventory taxes to rise unless something replaces that Walmart. Say the state stepping up. Which tends to happen via the state giving less to the towns like North Smithfield.
“You know what is missing in this discussion (a discussion happening in every town USA)? The question: Compared to what? What are we basing the above statements on? Is it simply that we have less money after the bills are paid? Well, from 1955 to 1998, GDP rose by a factor of 20. Tax burden as a percent of income rose by a factor of 26.7. But income for a family of 4, 2 people working (sound familiar) only rose by a factor of 11.5. From 1976 to 2001 the top 1 % share of income went from 8.6 % to 21%. Yes, we have less money at the end of the day. Unfortunately, not benefiting from the national wealth as we had in 1955 (when the tax burden was 18% of your pay and would be today if all was equal) is a national policy issue.”
This is the issue of small business. See, we are all just trying to earn an income. Just like the person who works for the multinational. The income is much less because business sales are down. So, how should I plan for the pending tax rise? Do not just give me an answer that involves further big business moving into the area, because as I showed in the post on property taxes and development, it’s not so simple as welcoming Mr and Mrs. big business into the neighborhood. You need to invest in your employees’ inclusion training programs for them to be more aware of workplace diversity issues, go to https://www.qualtrics.com/experience-management/employee/diversity-training/
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“But, for my purposes Smithfield (an abutting town) presented the most interesting data. They had a new retail development go in, but ½ the size of that proposed for my town. It’s citizens have seen since 1999 in sequence a 9.8, 4, re-val, 5.5 and 8.7 percent rise in the tax rate. It’s commercial development has been only 10% industrial. My town only had a 6.4% total rise in the same time span.”
Oh save me great god of the mega corporations from the evils of local taxation. Yeah, I didn’t think praying would work.
Next up involves a CVS move. CVS is headquartered in Woonsocket. It obviously has some new hot shot who has a better way. They are looking to own their stores and not lease. They are consolidating 2 stores into one bigger store on new property. Yes, about ½ the property was zoned commercial, the other ½ was residential (real houses on it) turned commercial. This is important, because the CVS consolidation will leave 2 existing commercial spaces empty. We’ll add them to the Walmart space and potentially the Lowe’s space as it is suppose to be moving to the new North Smithfield development which is built on what was 126 acres of woods.
Sticking with Woonsocket, the location of my flower shop, the city has managed to add to its commercial property stock while turning a good portion of it into none productive commercial property stock. How soon do you think those empty places will fill up? Don’t hold your breath.
Some more good news. I managed to cut a major expense for the shop just this June to the tune of $379/month. We were in a unique position in that they kind of needed us. It’s not going to happen again. $4548 per year. Nice. It’s the heating expense for a year assuming the speculators don’t get active again. Yep, get rid of those government regulations as they sure are doing me harm. NOT!
The plaza that one of the CVS stores is moving out of is a customer of ours. We do seasonal decorating for them. It is about $3900/yr. Well, we’re not decorating with mums this fall and Christmas looks to be out too. How much you wanna bet spring next year and for some years to come is out? Gonna bet enough to do Washington a favor and higher someone?
Are you seeing where all this is going? I saved us some big coin. I’m loosing the same amount. Now, this is not the first hit from a CVS decision. Some other person there decided to make it simple for them to pay for their flower needs by going with Pro Flowers instead of feeding the 4 local florists which they had done for decades. They think they are getting a 20% discount from Pro Flowers. Little
do they understand the flower business. Not the first time mega corps thought they new more than the little guy. It represented about 2.4% of our business at the time. May not sound like a lot, but when you consider the extra business generated by CVS using one’s shop to send flowers, it becomes significant.
Let’s add a third issue. Refi. Time to take advantage of the low rates. The purpose is to improve, that is reduce your monthly cash outlays. But as any real small businesses owner learns, there is no such thing as a fixed rate. We have paid off 22.2% of the loan that combined the original purchase of the business and property with the rehab that needed to be done in 2004. We have about 36% of the tax appraised value in equity of the property. Business owners are advised to hire payroll management
experts to help them streamline their payroll processes.
Here’s the concern, do you take a 20 yr loan with a rate of between 5 to 5.5% to be reset in 5 years or do you take 6 to 6.5% to be reset in 10 yrs? Do I bet that in 5 years business is better because the economy is better which could also mean all that projected inflation do to the Fed monetary policy and at least protect my self for 10 yrs? Or do I bet that nothing will be much better and try to preserve my cash flow (in a small business it’s always about cash flow, accrual be damn) and go for the 5% figuring the Fed money flood won’t roost for at least another 5 yrs? Oh, the refi cost are going to run you about $4000. There goes that big saving from my hard nosed negotiations again.
Your facing tax increases beyond the usual but, not because the public employees are paid too much. Your running out of area’s to cut. Major corporation moves are working against you just as off shoring is working against the middle class, the very class of your concern as you are in it and draw your income from it. And all the policy talk being pushed has little to do with the issues that you are facing because the number one issue you are facing is a lack of a middle class
Have you heard of the “hourglass strategy”? Look it up. Ah, no it’s not a strategy you can use, but is one that will work against you.
Some of the trends you mention are over 100 years old. The industrial farms in the Red River of the North valley arrived in the 1880s and put Il and IN wheat farmers out of the business. Sears Roebuck and Montgomery Ward ( the amazon of that day) put a lot of general stores out of business (indeed their point was better selection and lower prices for the customer). Note that the railroads and in particular REA (railway express) where the tools of Sears et.al. just like UPS and FedEx are today. Its just that a physical piece of paper had to use the post office to reach the distribution center rather than some signals.
How many places that used to have signs saying EAT, did McDonalds put out of business?
So much of the stress against small business can be traced in the first instance to the railroads, meaning that the customer in a small town is no longer prisoner of the local merchant.The issue was fought for the first time in politics in 1896 by William Jennings Bryan.
Note that city encouragement of business started again when the railroads held cities up to agree to serve them. Omaha for example was forced to pay to get the UP to build its Missouri river bridge in the city (as well as put shops there), the UP was up front about it and held a bribe auction. Or look at Trinidad Co, the D&RGW stopped 3 miles from town at a new town to enable better land speculation returns. Of course in this case the AT&SF came to Trinidad and proved to be hailed as a savior. (Raton pass route)
So since 1865 the history of the US has been the squeezing out of small business starting with things like Iron, and the like (and actually somewhat with the New England cloth making trade)
It may be that the US has been on the wrong track for a long time, but technology has enabled more and more centralization of things over time, and its to late to stop the train now.
Ah, yes centralization. Economy of scale and all. All true and then the nation chose to impliment policy that balanced the scales and assured the balance of efficiency of money against the efficiency of people’s lives. The efficiency of people became primary for a time in this nation as it was understood that all win with a focus on people’s lives. Not true when efficiency of money is primary.
With that you offer no solution for the business. The focus of the posting.
And in my neck of the woods, two separate companies were able to claim the new hire deduction for me; one in 2008 who hired me from a layoff for 6 months in 2007, and another in 2010 after I was laid off from the previous company after they were bought out.
And my current company feels that one supplier for all office supplies is best, even if we pay $40 for a charging cord that our office manager used to get for $7 online by comparison shopping.
Nice street view description of the problem.
>>From 1976 to 2001 the top 1 % share of income went from 8.6 % to 21%.<<
I wish to hell I could get the source of — or, more especially, a link to — this stat. I have two paltry sources so far on the alpha/omega issue of income share — shift of share that is — which I have pasted on my link-to blogspot. As Oliver said: “More please?” Anybody?
Dean Baker (in 18th reply on his blog post — the only reason I know the most vital “Great Wage Depression” stat) reproduced what he called “a slightly altered table from Gordon’s paper, showing income shares in 1972 and 2001″ — my percentage changes on the right.
% 1972 2001
0-20 ______ 2.6%, _ 2.0%____– .6
20-50 ____ 16.0%, _ 11.7%___ –4.3
50-80 ____ 33.7%, _ 27.2%___–6.5
80-90 ____ 17.0%, _ 16.1%____ –.9
90-95____ 10.8%, _ 11.3%___ + .5%
95-99.0___12.2%, _ 14.8%___ +2.6%
99.0-99.9__ 5.7%, __ 9.6%____+3.9%
99.9 -100__ 1.9%, __ 7.3%____+5.4%
(see p. 84 of Gordon for similar breakdown of wage income)
THE ABOVE INCOME SHARE CHART IS GETTING LONG IN THE TOOTH. This Wall Street Journal article (see part 4) says the share of income going to the top 1% alone increased from 10% to 22.9% between 1979 and 2006: “Five False Promises of Recovery.”
I enjoy reading your posts about the flower shop, and find them informative.
I would gladly volunteer to proofread your posts for minor spelling and grammar issues that take away from my ability to concentrate on your text.
I hope this is not insulting to you, as that was not my intention. If you would want this help, please e-mail me at tapetester at sign live.com.
That should be: as that ‘is’ not my intention. If you want “help”, I am busy.