So, after adding two trillion dollars in quantitative easing into the economy, Chairman of the Federal Reserve Bank Ben Bernanke decided that wasn’t enough and is adding another 600 billion dollars. And for what?
To bring down interest rates? Interest rates are already at historic lows. So the answer is to decrease the value of the dollar and bring back inflation.
Why? To bring up the value of the stock market. What does that have to do with the Fed? Absolutely nothing. It’s not in their purview, at least not according to their charter. But these are unusual times.
Here is a video explaining what the Fed’s quantitative easing really is… (This video has 2000 comments on YouTube!)
Well, that explains it!
What does this mean for you and your business? It’s not good.
We had a credit bubble. Too much credit allowed people to buy too many things. Now we have too much of everything. Too many houses. Too many stores. Too many products chasing too few dollars. That leads to deflation, which the Fed is trying to fight by causing inflation to counteract it.
Who’s going to win out? Well, I’m no economist but I think it’s going to be a long time before we work out all the excess credit and the government and the Fed are not helping by trying to prop up the old prices of housing and other goods, just like Japan has been doing for the past 20 years to no avail.
Keynesian economics has proved to be a failure. The Austrian school of economics says let the market fall, find a bottom, then rebuild without government interference. The 700 billion dollar TARP plus the 900 brillion dollar “stimulus” from the government and the 2.6 trillion stimulus from the Fed are not helping, they’re prolonging the misery.
We could have gotten where we are for free….
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Would you play poker if they kept changing the rules in the middle of the game? Yet you, as a small business owner, are expected to plan ahead when the rules keep changing and you need a government interpreter just to figure out what the hell is going on.
What are your tax rates going to be on income, capital gains, or dividends in two months? No one knows. Hell, Congress not only left before addressing next years mammoth tax hikes, they never came up with their own budget for the government. That’s their job!
How is Obamacare going to affect your business? No one has actually read the bill and the regulations are still being written. But everyone knows it’s going to be bad for business – like the new 1099 requirement, which doesn’t even concern health care.
How about payroll? According to Inc.com,
For many business owners this year, the budgeting process may grind to a halt once they hit the payroll line item.
Aside from pervasive concerns over the pace of economic growth, there’s the rising cost of health care, new health care rules and regulations, and a tax environment that’s anything but certain. Even the small business incentives recently legislated seem to many to be too little, too late.
Let’s just take a quick look at small business health care incentives. First, it depends on the number of employees and their average salary. Then, it only lasts for two years! Then, you’re stuck with the full price. How’s that going to affect your hiring decisions?
Most small business owners I know are just “hunkering down”, trying to weather the storm. But it’s going to last for years and you have to make decisions about your business’s future.
So where do you turn? If you have a good accountant you may be able to get some advice on the government’s maelstrom of regulations.
One CEO I saw on one of the financial channels said that their employees who could interpret all of the new regulations were being snapped up by other companies at salaries starting at over $300K a year.
One good resource I often use is NFIB.com (the National Federation of Independent Business). It has a ton of free content and memberships are available at $180/year.
My only other advice is to vote the idiots out tomorrow (Nov 2). Down here in Florida we have an invasive plant called kudzu – it takes over everything and destroys the natural ecology, just like the federal government is trying to do with the economy. It’s time to break out the herbicide..
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Small businesses pay a disproportionate amount per employee to meet the requirements of federal regulations.
According to a study for the Small Business Administration’s Office of Advocacy (summary, full report) the total cost in the U.S. to meet federal regulations in 2008 was $1.75 trillion. Yes, that’s trillion with a T.
So let me get this straight. First, the government is spending $4 trillion. Then it costs $1.75 trillion to comply with their regulations. If the economy is $14 trillion that means that government is 40% of the economy. And that’s just the feds – it doesn’t include state and local governments.
Not only that, but small businesses are paying a higher cost per employee than large businesses. According to the report, companies with less than 20 employees pay an average of $10,585 per employee while companies with over 500 workers pay $7,755. That’s 36% higher for small businesses.
Breaking it down by sector, small businesses pay 364% more per employee to meet environmental regs and 206% more for tax compliance.
And it’s just going to get worse with the health care bill, not to mention the latest attempt in congress to regulate all small farmers.
I recently read a book called Everything I Want To Do Is Illegal: War Stories From the Local Food Front by Joel Salatin that’s a fitting description of a small businessman dealing with federal regulators.
All I can say is “C”mon Tea Party!”
Everything I Want To Do Is Illegal: War Stories From the Local Food FrontEverything I Want To Do Is Illegal: War Stories From the Local Food Front
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Where are tax rates going in 2011? If you guessed “up”, you’re absolutely correct. If Congress doesn’t do anything about the Bush tax cuts which are slated to expire in 2011 here’s what happens.
The estate tax, 0% this year, will go to 55% on assets above a million dollars. Now, your estate has already been taxed. You’ve paid income taxes, property taxes, dividend taxes, capital gains taxes and you’re sitting on what’s left over and the government still wants over half of what you own when you die.
George Steinbrenner’s heirs saved $500 million dollars – that’s $500 million they wouldn’t have if George had died 6 months later.
The income tax rates, which Democrats keep insisting are “tax breaks for the wealthiest Americans” will change as follows:
- 10% goes to 15% – If you pay a 10% tax rate you are not one the “wealthiest Americans” and your tax rate is going up 50%!
- 25% goes to 28% – a 12% increase
- 28% goes to 31% – a 10.7% increase
- 33% goes to 36% – a 9% increase
- 35% goes to 39.6% – a 13% increase
Because most small business owners in America pay personal income tax rates on their business profits, this affects your bottom line. And that’s just for starters… Continue reading .
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This got my attention. In a column by Deroy Murdoch he explained one of the many consequences of Obamacare. More paperwork for us small business owners.
Specifically, ANY vendor you spend more than $600 a year on will require an IRS form 1099 starting in 2012. Whether it’s a graphics artist or Best Buy, it doesn’t matter.
According to Rep. Dan Lungren (R, Calif.)
They will have additional accounting costs that will consume time and money,” Lungren tells [Murdoch]. “They will be required to keep a running tab with every vendor, all the way from restaurants to anything they buy — a piece of equipment, an airline ticket, or a hotel room. And when they reach the $600 threshold, they will be required to file 1099s for each of those vendors.
What is Home Depot going to do with the million 1099′s it receives from all those contractors out there?
Lungren also points out that small business owners will likely do more business with big box stores rather than local businesses to alleviate the paperwork.
My question is what the hell does this have to do with health care? Now we’re starting to find out what was in those 2600 pages.
You know what else is in there?
Atop this, the Galen Institute’s Grace-Marie Turner reports that Obamacare will require employers to evaluate their health plans’ affordability by calculating each employee’s household income, not just that worker’s individual wages. This likely will involve, at a minimum, collecting income declarations from every staff member.
You’ll also have to find out whether they have an 18-26 year old at home and whether they need health care from your company.
Can the government be a bigger pain in the ass of small businesses?
“YES, WE CAN”.
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We’re approaching the start of a new year and many of you are looking into starting an online business. One of the steps is deciding whether or not to incorporate your business.
As a small or home office business, you have four main choices for your business as a legal entity in the United States (for those of you in other countries you will have to check on your own business tax laws):
* Sole Proprietor
* General Partnership
* Limited Liability Company (LLC)
* Subchapter S Corporation
Of the other possible options, a “C” corporation is generally for large businesses and Limited Partnerships can be complicated, so I won’t get into them here.
Also, don’t forget your local business licenses. You may have to register your business in the city, county and/or state where you live. You should also set up a separate bank account for your business.
In general, your main considerations are going to be liability, taxes and how you intend to finance your business. Continue reading .
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