A key to getting this economy moving forward is to turn small business loose. Since small companies generate over half the economy in the US, we need an approach to public policy that addresses this new reality.
Mark Cuban has offered a modest proposal -- ban taxes on small business. From his blog:
If you want to see an immediate re invigoration of the economy, open the door back up for individual entrepreneurs to enter the real world without fear and without an immediate financial burden that pre empts their ability to be successful.
If we really want to stimulate job creation in this country, take the same approach to small business with 25 or fewer employees that we take to Internet taxes. Outlaw them.
No taxes of any kind on small businesses with 25 or fewer employees. No employer payroll tax. No state or local taxes. No taxes on earnings. Nada. The business owners will pay income taxes on their personal income they pay themselves, but not corporate earnings.
This is an interesting proposal. The pass through entity, be it an S-corp or an LLC, passes through all profits to the entrepreneurs. It does not matter if these profits are put into the entrepreneur's pockets, used to improve working capital, invested in assets such as equipment, or used to pay down debt. This creates a disincentive for the entrepreneur to invest in the business, especially during economic times like these.
Cuban's proposal would give us a chance to test out the impact of the Fair Tax. He advocates that small businesses only pay sales taxes. What a great way to prove the power of a simple, non-income based tax system.
(Thanks to John Wark for passing the Cuban blog post along).
Leave a comment