‘Tis The Season

It’s tax season, and most of us are up to our ears in alligators. Is there any reason why our tax code has to be this complex? And not just complex but punitive. If you try to climb the ladder to success, the government greases the rungs. And now President Biden is suggesting he wants more out of our hide. Apparently, according to his appraisal, I’m rich. It could have fooled me. But satisfying that definition is no longer a very high bar, as it increasingly can be defined as simply being employed!  It’s really the perfect storm for my particular peer group. We nearing retirement, trying to maximize our end-of-career savings, max out our pension plan contributions and pay off debt. We are just on the threshold of high income, the bottom tier of the one percent, subjected to punishing taxation but unable to afford the hoards of attorneys and accountants to protect us. The only thing worse than being wealthy in this country is being almost wealthy. We are business owners, beaten down by regulation, permitting, inspections, and the constant drip, drip, drip of fees and fines that suck the profit out of your margins. Using New York as an example, it has instituted a fire inspection and a furnace inspection for businesses, both requiring fees. If you’re in the medical or dental field, you’re required to have your x-ray units inspected, a procedure that was once performed by a state inspector with a registration fee. Now, practitioners have to pay for both the registration and the inspector. New York’s regulatory apparatus even requires a license for braiding hair. Inflation has taken a huge bite out of the bottom line as overhead costs soar. Small business the country over has been hit the hardest, with employee salaries skyrocketing as employers have to compete with Walmart and Mcdonald's, offering upwards of $19 an hour for unskilled labor, with benefits and signing bonuses. And it’s slim pickings for them at that. Despite the government’s insistence that we are at full employment, the figures have been skewed by a change in definition. You’re now counted as unemployed only if you are actively looking for work. And few are. Again, using New York as an example, 36% of able-bodied citizens of working age are enrolled in Medicaid. In this labor market, with a help wanted sign in every window, how can that be? With generous public assistance and rubber-stamped unemployment benefits, that’s how. Many choose to play the system, alternating between brief stints of employment and long stretches of government benefits. Covid has shown us the way. A plant manager in Kentucky told me that his factory workforce was constantly in a state of flux, so attuned they were to working the system, they knew just how long they could remain employed before returning to the dole so they could maintain the highest level of government payments. That plant, incidentally, has since closed its doors. No longer is the employer protected from these employee scams. At one time, if an employee quit, they could not receive unemployment benefits as their job was available to them. It was their choice to give up the position. Those days are over. The unskilled worker is actually highly skilled in their ability to work the system. A small business owner had a worker who consistently called in “sick” the day before long holiday weekends and vacations. When reprimanded, she bristled and immediately quit. She promptly filed for unemployment benefits, claiming she wasn’t actually sick but was needed at home to “care for her sick children, and the employer was asking her to choose between her job and the health of her kids.” Cue the tears. Bingo, the state granted her request, and the small business was stuck paying her unemployment benefits. An obvious scam, if there ever was one. Blue state, of course. And with yet another hit to the bottom line, what recourse does a small business have? Let’s see: they can raise their prices for goods and services and risk alienating their customer base. That’s not good for business.  They can decrease salaries and employee benefits and risk losing employees. That’s not an option. As I mentioned, Walmart and McDonald's above and others like Home Depot they can reduce the number of employees, forcing the remaining employees to pick up the slack. That results in reduced efficiency but leaves them the prerogative to carry on. Not so for the small business owner caught between employees and government-imposed overhead; they’re the only ones whose salary is going down year after year. Those small businesses that are our largest employers! Their fate close the business. That’s when local politicians whine about the community “losing its character” and Main Street shuttering its storefronts. And consumers lament the loss of convenience despite having chosen to buy cheap Chinese manufactured goods at the big box stores all these years. But alas, Florida is booming. Nashville remains one of the hottest markets in the country. Texas has a thriving economy, and the Dakotas are battling to see who can lower their taxes the furthest while state coffers are overflowing with revenue. How can those red states remain prosperous while states like New York and California suffer economic and cultural decline and impose punitive taxes and regulations, worship at the altar of climate change, stifle business and drive out the entrepreneurs and innovators?  I think I just answered my own question.