A Solution Op-Ed

I have a few seconds here on this fine Sunday night, and after a conversation I had with an entrepreneur yesterday that ticked me right off, here I am writing to whoever will read. With month-end out of the way, right before the chaos of fiscal year end creeps up- I thought I’d vent, or blog, or whatever it is you want to categorize it as.

I’m sick and tired of hearing entrepreneurs complain about income tax percentages or capital gains. As an entrepreneur you should know that you have to have income before being taxed- as such, how much you pay on your earnings is a good problem to have. An even better problem to have is how much you have to pay on capital gains. Period, end of story. Those 2 components are not bad things and certainly shouldn’t hinder an entrepreneur’s decision on whether or not to start up a company.

Then I got to thinking on a more macro level, yes: in economical terms, we are out of the recession. By definition if we have two consecutive quarters of positive GDP growth then we’ve hit our economical trough and are on the up swing. So great, yippee: we as a country produced positive GDP numbers 2 quarters in a row, what’s the problem? Then I got to thinking even more (I know, I know- its hard to believe that I actually think), most of this GDP growth (in my opinion) is caused by the trillions of dollars in government stimulus. So are the GDP numbers deceiving? Maybe. What happens when the stimulus effects go away? Can we as a country sustain positive growth of our gross domestic product after all the stimulus dollars go away? Who knows … But the fact remains: unemployment is lingering just north of 10% and flirting with the highest unemployment rate since the great depression. So maybe we’re not out of this economic disaster just yet.

So what can the government do to sustain job growth with out just injecting trillions of dollars in so called “stimulus package” and “TARP (troubled asset relief program)” funds?

My answer? TAX FREE SMALL BUSINESS. Duh.

If capital gains and tax percentage rates shouldn’t play a role in an entrepreneurs decision making process, what would prevent these hot shot entrepreneurs from starting a company and create real, sustainable jobs in our country? The answer is this: the headache of state and employer taxes, the amount of ridiculous paperwork and the convoluted nature of how expensive this country makes it to start a business in the “real world”. The state of entrepreneurship and business in America falls into two categories: Real World & Internet.

Its way too complicated (and expensive) to start a business in the real world; thus, the path of least resistance is the internet.

It takes a few measly minutes to set up an account online with some advertising network, post it to your website, and generate some traffic that turns into income. No tax identification, no licenses, nothing: it’s simple. It’s the internet economy dominated by Yahoo!, Google, Microsoft, Craigslist, AOL, and Ebay. Again, the past of absolute least resistance for entrepreneurial people, that’s why they do it as opposed to starting a real business, in the real world.

It makes sense: take the path of least resistance (internet world) rather than going and starting up a company in the real world and dealing with business tax responsibilities, business employer requirements, legal structure registrations, licenses, permits, dealing with lawyers, accounts, etc etc. Why go through all that?

This brings me all the way back to the question: how to create jobs, and make this positive GDP growth REAL.The government needs to OPEN UP! The door that is… don’t put these entrepreneurs between a rock and a hard place. Do to small business’s what you do to internet business’s. Keep it real people, we all know internet business’s don’t treat employees like real employees in the real world. They don’t pay employee taxes until they are big enough to (unless they get caught). Again, a message to our government officials and policy makers: if you want to create real, sustainable jobs- TREAT SMALL BUSINESS THE SAME WAY YOU TREAT INTERNET BUSINESS’S. Further, don’t tax real world small business any kind of payroll tax, state or local tax, don’t even tax earnings. The owners will pay income taxes on the personal side but not on corporate earnings! Don’t worry President Obama, once these business’s blossom and hire more and more employees then you’ll get your tax $$ AND we’ll have created a heck of a lot of jobs by that point too.

They would be able to take risks with far less capital. Hard work would be the only kind of equity you’d need to start a business.

Economic impact would be immediate and amazing.

Not only would we see hundreds of thousands of new businesses started seemingly overnight, with millions of new hires, but from those new businesses would come new ideas that hopefully would give us our next “Internet”, an engine for economic growth that super cedes today’s ideas.
Government officials and makers of these policies are so quick to just say “hey, lets use tax payers money as a viable solution”. Stop that. Make it easier for hard workers with ideas and passion, and great things will come of it.

Onward,
-mounir- 
mounir.gad@gmail.com