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June 30, 2011

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PAY MORE II--- Thanks Harrycat--for your complimets. I think that in my lifetime I have contributed enough to the benefit of the government and others. All I know is that the more they take from me and my company the more difficult it is for me to create new jobs and in recession to carry our people through it. It is a fallacy that trickle down economics doesn't work. I use most of the income of my company to create more jobs, start new companies and provide safety/benefits for our emplyees. Raising taxes on you may not effect the economy but raising taxes on those of use still creating jobs will. America will struggle until they take the steps necessary to promote individual capitalism once again. The socialistic countries of the world are gaining economic power mostly through the promotion of capitalism and individual effort. Led by China. I encourage you to write an annual check to the federal government with specific instructions to do with it whatever you think is important and let us know what that is. I have used my extra money to hire 4 people this year. I think that is helping put America back to work.

Bill M. -
I also have owned businesses for many years with all the effort and risk that I am sure you have also expended. I could only wish for a net of 250K/yr. That for me, and many others, would no longer be "small" business. If you net 250K or more you should pay more. These years have been very good to you, and not good at all for many Americans who just get by running a small business.

Harry et al: Paul Ryan's budget would be a good place to start: means testing Medicare; elimination of corporate tax deductions such as for corporate aircraft - which was, truth be told, added in the Stimulus plan which was almost universally opposed by Republicans before Obama chose it as his centerpiece of class warfare.

PAY SOME BACK---

Harrycat--pay some back? Have you ever seen the amount of tax a small business owner in this country pays for the honor of being a job creator? Let's start with the taxes on the $250k salary: after deductions 25% federal tax, 3% state tax, 3% payroll tax--roughly $78k. Now look at his/her company: Let's assume the business is successful and employs 50 people with revenues of $10M. So, payroll is around $5M. Now the company pays payroll taxes of around $350,000. The company pays gross receipts taxes to state and local governments of around $250,000. The company pays unemployment taxes, workman comp, retraining taxes of $100,000 or so. It then pays property taxes on property including software of another $50,000 or so. It pays sales taxes on every purchase totaling around $60,000. Under Obamacare not insuring your people will cost $800 per employee for the penalty tax which is another $40,000.(In our case we do insure our employees keeping them off Obamacare at a cost of $672,000--of note in effect once Obamacare comes into full implementation insurance coverage will be a hidden tax since the alternative i.e. the penalty is so cheap. In fact Obama wants to call it a "luxury/Cadillac" tax). This is the tip of the iceburg. It does not include fuel taxes, licenses, energy taxes, inventory taxes,registration fees, etc. But just taking this example a small business owner is paying $848,000 in taxes not counting Healthcare which adds $40,000 if you throw your employees to the wolves or $672,000 if you take care of them. This is before you pay ANY tax on profits you leave in the company to generate growth. Now let's look at what the government is already getting:

They are getting the $848,000 plus tax revenue on the salaries of the 50 employees of around $1,000,000. Payroll taxes from the employees of $350,000. Plus the benefit of the healthcare coverage.
This totals nearly $2,250,000 in tax revenue from the efforts of one small business owner who is allowed to take home $163,000 or 1/14th of what he/she generates for the goverment. Is it any wonder most small business owners are Republicans and resist more regulation or taxation? This also does not include the benefit the government gets from the small business owners who are the majority sponsors of local schools, local charities and local food bank programs.

And yet the governemnt ignores the small business owner with Democrats believing we are all fat cats writing off everything under the sun. With 9,000,000 small business owners in America employing 78% of the people we get token SBA (almost impossible to get) loans as our help with the banks. We get no help with the credit card companies fees and interest rates who substitute for our lines of credit. We get little to no help with outdated regulation review and repeal. We get little help with the use of illegal immigrants destroying out labor competitiveness. We get little help with Unions gaining political favors in contract bids and organizing our workers. Already the employement gains that have been made in the past 12 months have been by small businesses not large corporations. In the meantime they did nothing to save small business owners who adapt and will rise again or grow bigger.

So,Harrycat--perhaps the rich Hollywood, Wall Street and Billionaires can afford higher taxes but that is not what this is aimed at. This is aimed at the people in the $250K-$500k class who, like me, have spent their lives creating companies and good jobs for Americans. This may not be all small business owners but it does onclude a lot of them and every one of them you tax will hurt their ability to create one more job. Last friday Obama's economic team anounced that it cost $278,000 for evey job the stimulus created. That is a sad record. with $278,000 dollars of capital most small business owners would create 3-10 permanent jobs. Not temporary jobs for one or two more years.

It is difficult to negotiate when the other side starts the conversation with a statement that they will not move from a position that the side can not live with. Reps have right along shown no interest in negotiating.

If the TP types are allowed to run the Rep Party with the myths of Reagan (no new taxes, but off course he eventually had to) and Norquist, then we will have a default. Obama has blinked and blinked and blinked, but I think that is over.

I, for one, am ready to pay for what I have already received and see no reason that those who gained the most shouldn't be asked to pay some back.

NEGOTIATION IS AN ART-----

Thirty Seven years of making deals selling businesses, merging Law firms, doing succesion planning for family businesses and negotiating responsibilities/compensation,benefit packages has convinced me that negotiation is more of an art than a science. The best at it have guts, the ability to clearly see both sides of the issues, the ability to convince both parties that a successful outcome requires that both sides are equally satisfied, and to make the case that a successful outcome is more important than winning--whatever that means to either party. These are not easy skills to teach or to learn. Some people have a natural ability to negotiate. Guts for example is tough to teach. When the deal is on the line it is important to have the guts to tell both sides to back off, cool down, refocus on the benefit of a successful outcome rather than the issue they are posturing over. Talented negotiators usually have the guts to keep the parties apart for much of the discussion to keep emotions created by direct confrontation from getting out of hand. Ever try to negotiate with and angry or hysterical teenager who feels wronged? In my opinion most of the high profile negotiations we see fail because the parties are together too much and the negotiator mediates rather than negotiates. The NFL and now the NBA start with a meeting of the parties. Often they start with the idea of a conflict rather than a negotiation. So they have a meeting followed by a lockout or walkout. Both sides hit the media. Emotions om both sides skyrocket even among the fans. A skilled negotiator keeps the parties apart; clearly identifies the needs of both parties and their priorities; looks for agreement on the value of a successful outcome; looks for places of mutual compromise; looks for places to trade value and then begins to structure a potential compromise that he thinks is "fair". A skilled negotiator has no side--he represents a successful outcome and his focus is always on getting to it. I have hired, managed and trained hundreds of negotiators in the past 40 years. In the end the people with the ethics, guts, skills to be negotiators are few. More can mediate.

I would say that the odds that the President with his lack of Executive experience can successfully negotiate with the opposition are low. First of all he lacks the primary ingredient and that is he cannot represent a "fair" outcome because he stands for one side of the issues and he is loyal to that side. His political outlook doesn't allow him to see a successful outcome as the important result instead he sees winning as the important result so he can be a hero to his side rather than America. That is why he leans on Bill Clinton all the time. Bill Clinton can negotiate--he represents Bill Clinton,Inc. a person dedicated to helping the country by helping his party and himself. Tip O'Neill and Ronald Regean negotiated with successful outcomes at the fore. Richard Nixon knew to lean on Henry Kissenger's skills to get out of Vietnam, calm down the Middle East, open China, etc. Always the outcome came first and the issues second.

Think about what we face. A balanced budget is far more important to the country than any of the places we will allocate the dollars or how and who we tax. Those are just technical arguments among advocates. A skilled negotiator would get an argeement on the amount of the budget and tax revenue then work on the spending and tax plan to achieve it. But it will be extremely difficult with the political advocates in the room. Each side needs a leader with the party's confidence to represent them and a skilled, respected negotiator to get to the agreement. Too often leaders forget that the role of their managers (cabinet) is to do with what you give them. I personally would simply tell each cabinet member that next year you have 10% less than this year. Let them decide what to cut--that's their job. After managing through 5 or 6 recesssions I've never seen a company I couldn't cut spending 20% and survive. Call it shared hardship. Tough decisions are made by managers. But a healthy company results that is lean and low on fat and waste. Getting to a balanced budget is not brain surgery. Successful leadership is all about making decisions and reversing them as soon as you know you were wrong. You can't get back sunk costs. We need a lot of that in government right now. At the state level there is a lot of it showing up and 5 years from now we are gojng to have some excellent candidates for President. That's the positive side.

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