Wednesday, August 11, 2010

WSJ: Why small businesses are'nt hiring?

Chicago AM Wednesday 11 August 2010

Editors, The Wall Street Journal


The Monday 9 August Wall Street Journal OpEd “Why I'm Not Hiring” presents an all-to-rare picture of how current federal tax and spend policies affect a crucial member of the team, the small business owner. A critical responsibility is collecting and remitting two significant elements of federal income: income taxes and Social Security taxes.

Just how significant shows up in the 2010 Statistical Absract of the US [table 463 page 308] as comprising nearly 2/3 of all federal income from all sources. Because the actual dollars involved come from employers' bank accounts, not wage earners', the wage earner has no human feel at all for the actual money involved, yet when it comes to politicians offering things like medicare, the wage earner looks at those pay stubs and thinks: “Why not – look at what I've paid in.”

On the employer's side the perspective is completely different, but no less critical: Employers don't like to pay taxes anymore than wage earners, but in this case, since all employers are responsible, they can add the total tax to their prices, resulting in nearly 2/3 of all federal income coming from a silent, painless national sales tax. (And they want to add a VAT to that?)

This situation can be simply corrected by changing paragraph 3402 of USC Title 26 — 'Internal Revenue Code' Subtitle C 'Employment taxes' Chapter 24 'Collection Of Income Tax At Source On Wages'... from "every employer making payment of wages shall deduct and withhold upon such wages a tax..." to "every employer making payment of wages shall pay all of those wages to the employee...." The employer would still calculate the tax, replacing the reassuring note "you earned and your employer paid" with "here is how much the feds are expecting you to send in within 30 days"

Would this be inefficient? Certainly for an insatiable federal bureaucracy. But after a few months writing checks to the Government for 20% of their take-home pay, decisions about using the nation's wealth would quickly revert to the hands of millions of intelligent citizens, at the ballot box.

Arnold H Nelson

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