Sunday, July 29, 2012

Taxes and Community Support

"All politics is local," according to the late Tip O'Neal, and that includes taxes. In this election season of who did what to whom, I can tell you that this small business owner is mostly done by local government. The screwage often comes from on high by the state who gives permission to its vassals, county and municipal governments to do what they please to hapless small businesses that lack proper influence in their court. They won't tax the people directly, for fear of retribution, but the money has to come from somewhere. It's not generally "about Obama," although his stimulus plan did help us with reduced payroll taxes.

Putting a more positive spin on this, by supporting small businesses in your community, you help pay for  various services and benefits you receive on a daily basis. I may have built my business myself (with family, friends, volunteers, and a neglectful employer), but not without excellent infrastructure, well educated staff, roads for UPS and Fedex to bring me stuff and customers to get to me, police and fire to respond to my emergencies, and a plan for the eventual retirement of myself and my employees. In the case of my business, I pay through your purchases, over $15,000 a year. These are relatively "fixed" costs that don't move around much depending on sales.

That $15,000 does not include income taxes. As an S-Corporation, we have "pass through" taxation, so investors, such as myself, pay personal income tax on profits (when there are any). Income taxes are the bulk of federal and state government budgets.

This also doesn't include sales tax you pay, as we're just a conduit for collection. That extra 8.75% we collect would completely dwarf this chart. It would be a tiny footnote. It also doesn't include sales tax we pay for goods and services, including 125+ products we buy locally and consume.

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