My Tax Rate as an Individual and as an Employer

Bernie Sanders is proposing raising the highest bracket of the federal income tax from 37% to 52%.  This caused me to think once again about the taxes I pay.

I pay all of the usual personal taxes such as federal income tax, Social Security tax, Medicare tax, Maryland income tax, real estate taxes on my home, and the Maryland state sales tax.  In addition, I am a small business owner.  As a small business owner, I pay the following taxes:

Social Security (half for each employee)
Medicare (half for each employee)
Federal Unemployment
Maryland Unemployment
S Corporation Tax
Workman's Compensation Insurance (required by state)
Real Estate Property Tax
Personal Property Tax (laboratory equipment, supplies, computers, furniture, etc.)
Sales Tax

The sales taxes are too onerous to calculate, so I am going to leave those out of my calculation of the tax burden I carry as an individual and as an employer.  I did this calculation for the year 2018.

Leaving sales taxes out of the calculation for both the company and at home, the other taxes I paid equal 99.0% of my income.  Taking into account the sales taxes, that percentage goes well beyond 100%.

Now most of you are likely to argue that many of the taxes I paid are just a cost of doing business and it is not as though the various governments ganged up on me and took every penny I earned and more and left me to actually starve in the streets.  But it is true that if these governments did not tax me, my personal income could have been about 60% more than what it was.  Viewed from this perspective, I was likely only able to control the spending of about 35% of the income I could have had were it not for the many government taxes I pay both as an individual and as a small business owner.  I am one hell of a taxpayer.

Is it any wonder in the modern era that so few people choose to be employers and so many prefer to be employees.  This does not even consider the many risks involved in being an employer and a business owner.  It does not include the paperwork burdens.  It does not include the weight of the responsibility for your employees' welfare.  It does not include the cost of complying with the many regulations imposed by governments, many of which have little regard for a cost-benefit ratio that is rational.

Reducing the costs and the many other burdens that governments put on employers has a truly dramatic effect on encouraging entrepreneurs, who are under extremely heavy burdens at present.  The entrepreneurial spirit in America is being squelched.  Let it flourish and the growth rate in our economy will skyrocket.  Even small improvements in the growth rate have a tremendous impact on compounding the growth of the economy over the 40 year period that most people have yet to live.

Think about this when the Democrat Socialist Party politicians propose more taxes to partially cover the expenses of their many proposed new welfare programs.  Not only are they not going to allow entrepreneurship to grow the economy more, but they are actually determined to further squelch it, to smother it, to brutally murder it.  They simply view employers as the enemy, which is exactly what is to be expected of socialists.

More and more employers will go on strike -- they will shrug their shoulders and let all of these heavy burdens crash to the ground.  Atlas will shrug.  The many American employees will have far fewer jobs with far fewer people willing to bear the many burdens of being an employer.  The number of employers has fallen dramatically over our history as governments have grown.  This is not the only reason for this, but it has been an important reason for it.

Krugman and Schramm: The Fool and the Wise Man

Paul Krugman, post-election: "It is true that we've been adding jobs at a pretty good pace and are quite close to full employment."

Prof. Carl J. Schramm, Opinion in 16 Nov 2016 Wall St. Journal:  "Despite the addition of 161,000 jobs in October, the labor-force participation rate fell to its second lowest level in nearly 40 years, according to the St. Louis Federal Reserve.... America needs at least 325,000 new jobs every month to stanch the growing numbers of discouraged workers, according to the Bureau of Labor Statistics."

How low the left sets the bar for employment!  High employment is clearly not one of their premier goals.

Prof. Schramm, of Syracuse University, once headed the Kaufmann Foundation, which promotes American entrepreneurship.  He notes that:

• Firms less than 5 years old create more than 80% of new jobs.
• Fewer than 500,000 new businesses were started in 2015, which is a 30% decrease since 2008.
• Over the last 8 years, the number of new businesses has decreased by more than 1 million.  The missing new businesses mean 7 to 10 million missing jobs, which would have been enough to provide jobs to the millions of discouraged workers.
• New businesses are more likely to be started when the economy is growing at a 4% rate than when it is growing at a 2% rate.  The faster growth rate gives consumers the confidence to buy the innovative products of start-up companies.
• Too much attention is given to Silicon Valley whose start-ups are only about 5% of all start-ups and have higher failure rates and create proportionally fewer jobs than the businesses started by franchisees, which are 40% of all new businesses.
• Dodd-Frank suppressed the financing by local banks of local businesses in their communities, whose business prospects they are best qualified to gauge.
• Municipal regulations are particularly protective of older businesses and likely to discriminate against new businesses.

Address these problems and he says we can enjoy 4% economic growth.  The first step was to remove the anti-jobs, anti-business party from the presidency.

John Smith the Creator

One of the really good things to come out of this election was the rise of Joe the Plumber, Tito the Builder, and Cory the Well Driller. Each has built or intends to build a business and each is making or doing something that responds to the needs of others. None of them want handouts from government. They just want to be allowed the freedom to work incredibly hard to produce and create things that others want to purchase from them.

They all have the temerity to think that no one deserves to receive the wealth they created and Obama wants to spread around to others who have not worked as hard and taken the risks they have. I like the fact that each has been identified as a producer and creator of wealth and jobs. These are good men and many people seem to have responded positively to that. There are still good Americans who are not bent on mooching off others and are proud of their ability to be productive and creative.

One of the tragedies in America is that we do not call the parasites who want to receive the money Obama wants to spread around, Sally the Parasite, Joan the Moocher, and Greg the Bloodsucker. We are a nice people who rarely assume that those who produce and earn little most likely deserve to earn little. In reality, there often are good reasons why some Americans earn little.

Of course, many who earn little are also learning the skills or developing the business that will one day allow them to have a very good income. Our upward mobility in America is largely unheard of in other countries around the world. Many of the poor are on their way to wealth. If we spread the wealth as Obama wants to use force to do, then many Americans who want a chance to become wealthy will never be able to do so.