With all of the love for small business coming out of the last debate, it has made a few people ask me: Just what is a small business? Am I going to get some of these breaks Obama and McCain are planning to offer to all of us "Joe the Plumbers" our here on Main Street?
I have my own definition of small business, but that really does not matter when it comes to tax breaks.
I wish I could give you a simple official definition. The lobbyists from K Street in Washington have been busy over the years pushing for special breaks for certain kinds of small businesses.
If you are a soybean farmer you have to be under $750,000 in sales. But if you produce chicken eggs, the definition is $12.5 million in sales.
If you have a business that provides support for forestry you can be as big as $7 million and still be a small business, unless you are in forest fire suppression in which case you can be as big as $15.5 million in sales.
Other businesses are defined as small by their employment. If your business is involved with soybean oil processing you are small up to 500 employees. But, any other kind of oilseed processing you are small all the way up to 1,000 employees.
Plastics Plumbing Fixture Manufacturing? 500 employees. Resilient Floor Covering Manufacturing? 1,000 employees. Glass Container Manufacturing? 750 employees. Ammunition (except Small Arms) Manufacturing? 1,500 employees. Confectionery Merchant Wholesalers? 100 employees.
And so it goes.... Line after line after line, page after page of definitions (click here as scroll all the way down to see the summary table).
And just wait until we start targeting "small business" for more tax breaks and incentives. The lobbyists will really get down to work....
Wow, that's mind-numbing! Luckily, I will be a small business for a while since I will only be working for myself.
I found it most interesting that one candidate's argument was "95% of small businesses make under $250,000 per year." His running mate later said it was 98%. How can that justify taking more tax dollars from the top? Businesses create value. We cannot risk taking more of that value away. Plus when businesses retain more capital, it often goes into banks and investments....which means more opportunity for responsible Americans to take out a loan. Increasing taxes for businesses over $250,000 may help the "middle class," but it strips value away from value creators. Perhaps those who don't create some form of value should be taxed more.... or take it from the top and we will have less progress in this global economy. What do you think, given that we will not see simplification of the tax code anytime soon?
Actually, as much as some business owners may complain about it, increasing taxes for incomes over $250,000 (which is not the same thing as increasing taxes on receipts of more than $250,000) is simply an effort to return the tax code to the progressivity it has historically had and to reverse the regressive tax policies of the current Administration.
The U.S. economy has managed to grow in a healthy fashion with a progressive tax code for most of its history. I see no reason to assume that will change now.
And I particularly like the Oliver Wendell Holmes quote: "I like paying taxes. With them I buy civilization."
Low taxes on upper income households and businesses has not trickled down the the rest of us and never has, no matter how many times it has been tried. Meanwhile, we have things we need to pay for. Like the American consumer, the American government needs to start balancing the checkbook.