Government Needs To Stop Biting The Self-Employed
Walter Russell Mead at the American Interest online, Feb. 20, arguing that the government needs to shift its policy to favor the entrepreneur (via the WSJ):
Currently, the American legal and regulatory system is set up to bind as many people to employers as possible. The government wants you to be a wage slave and sets up a regulatory framework that keeps as many of us as possible yoked to bosses and management.The IRS doesn't like the self-employed, fearing they may conceal income. Banks and credit card companies view such people with suspicion, and it is notoriously difficult for start ups and part time enterprises to have access to formal finance. Many services are hard for the self-employed to get on terms like those made available to employees of large corporations: from health insurance to retirement planning, many things are harder and more expensive for the self-employed. The payroll tax system is brutal: the self-employed pay both the employer and employee halves of Social Security and Medicare taxes, almost 20 percent of income and likely to go higher. Many cities will tack on unincorporated business taxes, mass transit taxes, and other interesting feudal exactions and dues.
There are other, subtler ways in which the current system favors old style large employers over small firms. The cost of hiring people can be prohibitively high for small businesses: the paperwork involved in hiring so much as a cleaning person or babysitter can be cumbersome. Hiring full time workers involves negotiating the requirements for worker compensation, unemployment insurance and much else. The cost of these barriers cannot be calculated: jobs foregone, businesses stifled in their cradles, ideas untested, innovations untried.
...The jobs of the future will not all come from start-ups and small business, but a very large proportion of them will. The best industrial policy we can have now is a policy that supports the rise of new information and service based enterprises. Small business and other, innovative forms of creative association (like co-ops and partnerships) will be a key engine of growth growing forward. We must do everything possible to accelerate and promote their growth; it is the best and fastest way out of our current troubles to the broad and sunny uplands that lie ahead.
I worked as an employee at companies for a very short time -- before college, and for three years after college at Ogilvy & Mather. After that, and ever since, like my father, I've been my own boss. More and more people are.
So many policies ignore this; most notably, the stupid gargantuan health care "reform." Oops...they didn't untie health care from the workplace. So, in an age of entrepreneurs, freelancers and others already getting boned by the government, people will continue to keep jobs they shouldn't stay in to keep their health insurance and to lose their jobs and find themselves screwed when they have to buy new health insurance when they're no longer 23 and healthy. That's the age when I'd like to see people do what I did and sign up, as individuals, for an HMO like Kaiser, that only raises their rates based on age once you're in.
Best advice I can give to 20-somethings entering the workforce for the first time: get your own health insurance in the individual markets. You're young. It will be cheap. Often cheaper than your employer's group plan. Now you have bargaining power.
Snakeman99 at February 22, 2012 7:40 AM
Much of that sounds like hoops the gov't pushes on buisnesses. So if self employed you get the worker hoops you have to jump through and in addition the buisness hoops you have to jump through.
Joe J at February 22, 2012 9:34 AM
Not to mention people who said they should have retired X years ago but stay in the job they're in for the same reason - health insurance "benefits" soar from $500 to over $1000/mo for 2 people. Yet if they took your plan and sought their own insurance, they wouldn't see this rate increase.
Patrick at February 22, 2012 2:05 PM
Do such insurance plans still exist? When I looked about a year ago no had any such guarantee. Next year's rate will be whatever it will be. Granted, Kaiser just said they don't offer products where I lived so maybe the do offer such a plan.
If I had signed up with the major HMO were I lived I would be out of luck now. Only emergency cover here. So I would be buying insurance from a new company.
If you have an office job, your insurance is almost always way cheaper (the most mine has ever been for just me is $50/month). I would guess that for the coverage the company insurance is almost always going to be cheaper. Now you might do like my friend and only get catastrophic insurance ($5000 deductible) vs regular company insurance ($500 deductible).
Other than the insurance part, the rest from what I know is fair.
The Former Banker at February 22, 2012 6:25 PM
Government is going crazy. Stock dividends are about to be taxed at an effective rate of about 60%, which will force companies to spend investment money buying back stock, and put a lot more pressure on companies to be short-term profitable at the cost of long-term investment, in order to prop up stock prices.
Cousin Dave at February 22, 2012 6:25 PM
Well you can apparently get Heartless Bitch Bumper Sticker here.
Amy and M4 -- send me your addresses and I'll order them and send them to you. But I want photo proof they are on your vehicles afterward, okay?
Jim P. at February 22, 2012 9:06 PM
Stock dividends are about to be taxed at an effective rate of about 60%
Stock dividends are taxed a ordinary income in most circumstances. Is that law about to change?
Christopher at February 22, 2012 10:47 PM
The point is that stock dividends in the US represent double taxation--the money is taxed at corporate level and again to the recipient (assuming the stock isn't in an IRA or 401k, or something similarly tax-deferred). Depending on tax brackets, the combination of the two taxes (top corporate is 35% for profits over $10 million, top individual goes to 39.6% next year) yields a compounded rate of 60.74%.
silverpie at February 23, 2012 6:57 AM
silverpie, that's OK. We know only rich people can buy stocks...
Radwaste at February 23, 2012 7:08 AM
The point is that stock dividends in the US represent double taxation
I'm aware of the double taxation argument. It's kind of bogus with respect to what Cousin Dave wrote, which makes it seem like something is about to change in how dividends are treated, which is not correct; there is no plan to change how dividends are treated by tax law. It's always been the case that they are taxed twice - at the corporate level, and then at the individual level.
Christopher at February 23, 2012 7:52 AM
Actually, there is a change coming at year-end 2012. Currently, most dividends are taxed as capital gains, which means that the current highest possible rate is 35%(+)15%, which is 44.75%. (I use (+) to mean the compounding operation.) I like to call that "1½ taxation." Starting 2013, this ends and they go back to the full rate. All this is before the effect of state taxes, of course.
silverpie at February 23, 2012 8:19 AM
That's assuming that Obama's budget passes the Republican House unmodified, which will not happen. And disregarding that few corporations pay anywhere near 35%.
Christopher at February 23, 2012 8:44 AM
"It's always been the case that they are taxed twice - at the corporate level, and then at the individual level."
Does that make it OK?
If you get a refund one year, you have to declare that as income the following year. Is that OK?
Radwaste at February 23, 2012 12:35 PM
"If you get a refund one year, you have to declare that as income the following year. Is that OK?"
That's not true, I'm 99.7% sure, of federal refunds, and is only true of state refunds if you actually reduced your taxable income in the previous year by paying the tax. (The technical term is "tax benefit rule.")
URL points to my employer, for whom I do not speak.
silverpie at February 23, 2012 2:14 PM
"That's not true, I'm 99.7% sure, of federal refunds, and is only true of state refunds if you actually reduced your taxable income in the previous year by paying the tax."
Right, that's the way we do it in AL. You can deduct your state taxes withheld on your federal taxes, but if you do that, you have to declare your state refund as income on your federal taxes the next year.
Cousin Dave at February 23, 2012 6:59 PM
Saying health care reform ignored the self-employed is a little disingenuous. As they wrote the ACA they tried to balance people's desire to keep their current insurance plan (for the most part tied to their employer) with the effort to make the individual and small group markets affordable. The state-based health insurance exchanges are the mechanism designed to expand the individual/small group market. It obviously remains to be seen whether they will make the slightest bit of difference.
Sam at February 24, 2012 11:58 AM
So, in other words congress didnt mean to fuck over the self employed, they are just incompetant?
lujlp at February 25, 2012 7:46 AM
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