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Local and National News - Kootenai County, Idaho
Honoring the courage of small business
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| Mary Souza |
Heart of the Matter
My wonderful husband and I are celebrating our 30th wedding anniversary this week. We deeply treasure our family and appreciate our many blessings. Another of our accomplishments together is the small business we started nearly 25 years ago. We had two and a half children way back then (one on the way) and somehow, with youthful optimism, the time seemed right to strike out on our own.
It took tremendous energy and resolve to survive those first years. We lived on a shoestring and often paced the floor at night wondering how to make ends meet. But slowly we were able to build a client base, hire employees, buy trucks and build a building. Step by step.
Everyone realizes that starting a small business is a leap of faith but what most don't know is that the leaping continues; the risk-taking multiplies. It is with this in mind that I offer concern for small businesses today, in our country and our community as well.
The financial crisis is taking its toll on North Idaho, whether we deserve it or not. Businesses totally unrelated to the sub-prime mortgage meltdown are feeling the crunch and Kootenai County unemployment has jumped to levels even beyond the state average. It is frustrating for business owners to lay off great people for reasons beyond their control, but most businesses across the country are facing that very problem.
Now our newly elected federal administration is considering tax increases on people making more than $250,000 per year. Sound like a good idea? Not in my opinion. Let me explain.
There are basically four ways to be in business: You can be a C-corporation like the big boys, a sub S-corporation, an LLC or a sole proprietorship. The C-corps pay their taxes at the corporate rate of 35 percent because the U.S. has the second highest corporate tax rate in the world. (A reason companies move overseas.) The remaining three business types all pay their taxes at the individual tax rate. According to the National Federation of Independent Businesses, about 80 percent of small business owners fall into this category.
Here is a critical point: All the profits from these businesses must be reported to the IRS as the owner's personal income. But the owner cannot use all that money for personal needs or the business will go under. They must leave most of it in the business for cash flow and company growth. So, increasing taxes on individuals above $250,000 will hurt many businesses, right now, when they are already struggling. It will make things much worse.
You won't have to worry, will you? The increases won't hurt you, right? Not unless you own a business. Not unless you work for a business. Not unless you buy groceries from a business or fill your gas tank at a business or buy any products or services at all.
Uncle Sam may not raise your taxes, but things will cost you more money and could even threaten your job. Remember Thomas Jefferson's famous line, "A government big enough to give you everything you want is strong enough to take everything you have." Taxes on one group affect us all.
The nation will get through this crisis and the economy will improve. Our experience of 25 years in business helps us weather the storms; we know the downs will be followed by a rise again and we trust that lessons will be learned and safeguards put in place.
It takes hard work and commitment to succeed in business, and certainly in marriage as well. Each requires risk, going all in, putting everything on the line. So let's hope for sensible governmental restraint, pray for a quick economic recovery and toast the courage of small business owners everywhere. Cheers!
Mary Souza is a 20-year resident of Cd'A, local small business owner and former P&Z Commissioner. Her opinions are her own. For a free archive of past columns visit www.marysouzacda.com. Comments: marysouzacda@gmail.com. Please visit the local issues Web site www.OpenCdA.com for more discussion.
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Note to Self wrote on Nov 18, 2008 10:08 PM:
Betcha what??? NOTHING. "
Joe the Plumber wrote on Nov 18, 2008 9:53 PM:
Golden Mean wrote on Nov 18, 2008 2:33 PM:
The reality is that businesses have been doing this for a long, long time and when handled properly, it is legal.
The type of boat is important. If you go out and buy a ski boat, you are asking for trouble. But something with live aboard possibilities is much easier to justify. For $200K, we're talking about a floating two bedroom condo.
That's only one of the perks of owning a business; the best obviously being the advantages of spending pre-tax dollars.
Play hard, by the rules! "
Although wrote on Nov 18, 2008 1:45 PM:
No Way wrote on Nov 18, 2008 1:42 PM:
Golden Mean wrote on Nov 18, 2008 1:00 PM:
Remember, we are talking about folks who are reporting income in excess of $250K per year as described in Ms Souza's story.
Mary, feel free to jump in here anytime now. "
Golden Mean wrote on Nov 18, 2008 12:33 PM:
Financing is easy too. You can get in with as little as 10% down but at 15% your interest rate will be lower. Twenty year terms are the norm making a $200K loan quite attractive considering that the monthly payment is only about $1550 per month. This seems to be an easy way to chunk away at your taxable income while stimulating the economy in the process.
I'm buying boat! "
Mary Souza wrote on Nov 18, 2008 9:00 AM:
How about this--I'll put up more "Open Session"posts on OpenCdA, which is where any and all reasonable comments are welcome. Then those that want to check the Press articles can just click over to OpenCdA and make remarks. Come on, give it a try. It just takes a minute to sign up, then you don't have to do that part again, ever.
Just go to the upper right-hand corner of OpenCdA's front page, click on "register" and follow the directions. "
Geeez wrote on Nov 18, 2008 7:51 AM:
boxers wrote on Nov 18, 2008 7:50 AM:
Golden Mean wrote on Nov 18, 2008 12:19 AM:
Maybe you're right, maybe real men do need to post using their real names. I'll think about it.
And speaking of real names, Suggestion to Trolls is a lovely name, it's French right?
Oops, time's up. I'm done thinking about your idea. Thank you but I'll be sticking with Golden Mean.
Au revoir! "
Suggestion to Trolls wrote on Nov 17, 2008 11:07 PM:
Suggestor to Mary wrote on Nov 17, 2008 11:03 PM:
I'm finding that a lot of people I know tune into the press at breaks and lunch so a blog would work out fine so they could just get a quick bit of info and news without having to surf.
The bonus is that you can just 'edit' out the trolls. "
Golden Mean wrote on Nov 17, 2008 7:49 PM:
Maybe we should march anybody with an opinion not in harmony with the establishment right out of town and into concentration camps for reprogramming and/or extermination?
We'll call it intellectual cleansing. "
S-Corp wrote on Nov 17, 2008 7:20 PM:
CENSORSHIP what a great idea! "
I live next to Muslims wrote on Nov 17, 2008 5:57 PM:
You need an emergency evacuation plan! "
Mary Souza wrote on Nov 17, 2008 12:06 PM:
A suggestion for Mary wrote on Nov 17, 2008 11:49 AM:
sal wrote on Nov 17, 2008 9:45 AM:
Golden Mean wrote on Nov 16, 2008 5:33 PM:
Then go LLC, you can file as either an S or C corp.
I agree that what I call loopholes are legal but let's face it, if the general public knew what we legally get away with expensing out, they would riot.
Maybe I'll tell them?
Another bottom line is that if you are reporting over $250K in net profit on your personal returns the economy is treating you pretty well.
If you want to help the economy, go spend some money and buy something to get yourself under to $250K marker. I know I'm going to.
It was nice to have a semi-normal conversation with you Mary. Now if you don't mind, I need to go find an excuse to misbehave again.
Note: The above moment of clarity was brought to you by the fine people who brew Sam Adams. "
Mary Souza wrote on Nov 16, 2008 5:18 PM:
C-corps don't have to be big, you are correct, but most companies (80%) choose one of the other three categories that are totally legal, not "loopholes". As you probably know, once you become a C-corp, you cannot change to one of the others and there are other restrictions as well.
The bottom line of any tax increase in this tenuous economy is that it will make the recovery much more difficult. "
Golden Mean wrote on Nov 16, 2008 2:14 PM:
You made a couple of mistakes in your article.
C corps are not just for the big boys. I own multiple small businesses and each one of them is a C corp. It's also important to note that a C corp only pays taxes on the bottom line profits and not the gross.
Fact is, regardless of filing status, the only reason that a business would divert reporting its profits to the owners return is to avoid paying tax at a higher rate. It's called a loophole and both you and Obama know it.
As a fellow business owner, I'm sure you know all about loopholes. I bet since you and your husband are likely listed as officers in your company, you deduct the expense of going out to diner together. I'm also sure that you deduct the expense of traveling anywhere. Shoot, we can even expense the gas used to drive our butts to work. And that's ok, it's legal.
To avoid get tagged by Obama's tax increase all you gotta do is spend some more of your profits. Buy yourself a new car. Or how about having your company buy a boat and call it office or meeting space? It's legal, ask your accountant.
By the way, congrads on your successful and profitable business. And you know, if you gotta have problems, how to minimize your tax liability is a pretty good one to have. "
One of the 80 percent wrote on Nov 16, 2008 9:38 AM:
We now see those qualities fading elsewhere in our society and I see America in its twilight.
It has been said thet 'As GM goes, so goes America.' We know how GM is going, but it is my contention that 'As small business goes, so goes America.'
Thanks again for the column. "
Another suggestion to Mary wrote on Nov 18, 2008 10:54 PM:
Even if its for the fun of frustrating ziggles/RSPA/Gail's Ex. "