Majority of the Tyranny

Founded c. 1775. Hope lost c. 2010.

We try not to get political here, but sometimes it’s impossible. So before we begin this week’s post, here’s some of our philosophy, without getting too detailed. These are not so much opinions as they are objective truths:

  • Governments should only provide what competition and a marketplace can’t – i.e., what everyone can benefit from, but which no private individual or business could receive a tangible return on were they to pay for it themselves. (Unlike governments, private agents have an incentive to reduce waste and increase efficiency – because they’re not using money blatantly confiscated from other people under penalty of death.) Which means governments should provide police, courts, a military, maybe some roads and not a lot else.
  • Taxpayer dollars are sacred and should be treated with the utmost of care.
  • Governments almost always do more harm than good.
  • Governments don’t and can’t create wealth. They can only take it from some and award it to others.
  • The higher the level of government, the greater the potential for damage and the greater the likelihood of inertia. It’s easier to reason with a county official than a state official than a federal official than a UN official.
  • Your job is not as critical to you as a politician’s is to him or her. Reelection is more important to a politician than any of the following: promoting individual freedom, increasing prosperity, fostering peace, curing disease, reducing and/or punishing crime. In other words, if a politician does something that seems illogical, it probably isn’t. It’s done with a nod to ultimately securing exposure, donations, or something that will hopefully result in more votes or the elimination of rivals.

If any of that sounds outlandish, let us know. Because this is what sounds outlandish to us:

The American Jobs and Closing Tax Loopholes Act of 2010. Like many other federal bills, this one’s title obscures more than it explains. You can read the 28-page summary here.

This bill punishes small businesspeople harder for committing the unforgivable, possibly racist and maybe even carbon-positive sin of trying to earn money without sucking at the ever-augmenting public teat.

In our new book (available in both physical and Kindle format on Amazon), we devote the final chapter to entrepreneurship – which is the only way to create lasting wealth. You really have to read the book (did we mention it’s also available at BN.com?), but in it we encourage you incorporate your small business as an S corporation – a special designation that gives you tax breaks single proprietors never experience. Setting up an S corporation costs only a few bucks but pays for itself many times over the course of your business. Or at least it did.

An S corporation lets you pay yourself a reasonable salary out of your profits, the remainder of which gets distributed among your corporation’s shareholders at the end of the year. This is NOT subject to self-employment tax, which is 15.3%.

The new law would affect anyone who has a professional services S corporation with fewer than 3 shareholders who actually have a hand in the company. In other words, one or 2 shareholders. In other words, people who would otherwise operate as a single proprietorship or a partnership – which are the most tax-disadvantaged ways to organize your business.

So if you’re an attorney, a recording engineer, a medical transcriptionist, a hairstylist, whatever – that all changes with the new law. It just becomes that much more difficult to operate, in an economic climate that isn’t exactly friendly in the first place.

People respond to incentives. This will encourage some people to simply give up their entrepreneurial dreams and go back to work for the stifling, soul-crushing man. It’ll encourage other people to get a little more creative with their business deductions. From the government’s perspective, this is wonderful – it’ll give all those new IRS agents something to do and someone to pester.

Here’s how your representative voted. The Senate is apparently set to give the House bill its imprimatur soon enough.

The Congressional Budget Office itself acknowledges that the bill would increase our already semi-comical deficit by $174 billion. (Oh, you think that’s cause for alarm? Look at you, you adorable little idealist. I bet you might even write a letter to your representative and senators, as if they read them or think your opinion matters.)

When is Congress holding its next hearing concerning whose nipple appeared on which TV broadcast? Or which baseball players injected what substances into their posteriors? Or which idiot thought the brake pedal on her Lexus was the one on the right? As long as it results in camera time for the politicians in question, who cares if it takes away from the business of actually freeing up the economy and letting capital and resources get allocated in the most efficient way?

But remember: it’s evil, greedy businessmen who are killing the country. Politicians and those committed to a life of public service are the real heroes.

(Thanks to Diane Kennedy of USATaxAid.com for drawing our attention to this horrid bill.)