How to Fix Inequality Without Guns 

Over 50% of the working population in the United States (120 million individuals) works in an enterprise comprising of 500 or fewer employees — AKA a small business.

Since 1995, it’s estimated that small businesses have generated over 65% of the net new jobs. And 52% of them are home-based jobs.

With these figures in mind, you would think this two-decade long trend might give our warm-hearted politicos a little insight into where the economy is headed… and how to fix it.

But alas.

The Status Quo is dead

The Status Quo, as described by Charles Hugh Smith on his Of Two Minds blog, is thus:

All we need to do to escape a “soft patch” (recession) is for governments to borrow and spend more money to temporarily boost incomes and demand until the private sector gets back on its feet and starts borrowing and spending more.

To help the private sector, central banks lower interest rates so it’s cheaper to borrow and spend.

As soon as the private-sector borrowing and spending rises, we can raise interest rates and trim state fiscal stimulus (i.e. governments borrowing and spending trillions more than they did before the recession).

Problem is, of course, it’s no longer working. The train is headed off of a cliff. But the uncomfortable truth is that any attempts to stop it will flip it off the tracks sooner.

Hence, our catch-22.

The source of all power

But there’s a way to fix it.

Income inequality, a hot topic in many political debates, comes down to one word: power. The way power is distributed throughout an economy informs how income will be distributed.

Vast inequality, Smith points out, is less about forced distribution of money — a traditional and wrongheaded measuring stick — and more about who controls the power to create value:

“Giving people money assuages the guilt of those at the top of the heap, but that’s not actually changing the inequality of the system. It may buy the silence of those deprived of opportunity, but it doesn’t change the sources of inequality. Since we don’t measure the sources of inequality, we don’t even recognize them. If we deprive a person of the opportunity to create value, to actively contribute to something positive and important, but reckon a handout of money will make inequality go away, we’re blind to the sources of inequality.”

The power to serve

The source of inequality begins with how much power the “little guy” has to serve his fellow human beings.

How much power does he or she have to create value? In a centralized hierarchy, not much.

How to fix it? Well, the epic rant you’ll read below provides us with a few clues.

Today, we feature a letter written by an American small business owner. Discovered by Simon Black of Sovereign Man fame, it tells the politicos everything they need to know about how to really turn this ship around.

(Deaf ears, I know.)

Read on.

Simon Black

This morning I read a stinging open letter written by a small business owner in the Land of the Free named Don Chernoff.

Chernoff imports and sells luggage, and he pulled no punches in voicing his disgust for the phony support and failed policies that constantly make his life more difficult.

I’ve edited his letter for length below; the full version is available here.

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You all love to talk about how much you support small business; the reality is the opposite. The economy is changing rapidly and is vastly different than just a few years ago. Many of the factory jobs in this country have gone and will not return.

Computer technology and automation will soon eliminate thousands more jobs (think truck drivers, taxi drivers, office workers, etc…).

Because there will be fewer middle-class jobs, many people who never considered working for themselves will be forced to become sole proprietors or open a small business. It is therefore critically important that you make it easier for these people to do so.

Right now instead of creating incentives for people to start their own small business, you create nothing but hurdles, allow me to give some examples.

Excessive health care costs

I work for myself and have to pay my own medical expenses. Before the “affordable care act” I was paying about $200 per month for a high deductible policy. It was far from perfect but it got so much worse under the “Affordable” care act.

I now pay over $400 a month, my deductible went from $5,000 to over $6,000 and my out of pocket costs for care have skyrocketed.

At this rate, I will go broke soon, and I am healthier than average. I don’t know how any normal working family or small businessman can possibly afford these rates without going bankrupt.

Income Tax Filing

I have to spend dozens of hours and thousands of dollars for a tax accountant each spring to prepare my taxes because I cannot possibly understand how to do it myself, and I have a master’s degree in engineering.

I also have to remember to pay quarterly estimates, even if my income in not predictable or fluctuates (which it does for most small businesses) or else I get dinged with penalties.

This is a time and cost burden that makes it very hard to run a small business. . . The current tax code is an abomination and should be scrapped.

Excessive import duties

There is a lot of talk lately about a “border adjustment tax” (BAT), a fancy name for an import duty on imported products. I design luggage and I need to contract out the manufacturing to companies that specialize in making luggage. All of these factories just happen to be in Asian countries.

Because of this I am charged almost 18% on my cost of goods for all my imported luggage. Last year these fees came to over $100,000.

The only reason I can see for these fees is government greed.

There is no luggage manufacturing industry in the USA that is being protected. This is another huge burden that makes it difficult to survive in the ultra-competitive luggage business.

Congress and President Obama had a chance remove this burden last summer, and they did what they do best: nothing.

If you do impose a border adjustment tax, will it be on top of the 18% I’m already paying? If so you will put me out of business.

Excessive customs inspection fees for imported products

My company designs luggage that is made in Asia and imported by ship to the USA. It is sold at all Men’s Wearhouse stores and Jos A Bank stores.

A recent shipment was delayed for almost 2 weeks at the port of Los Angeles for extra customs inspections.

The container was first x-rayed, and since that apparently wasn’t good enough, it was then opened and inspected by hand.

There was nothing in the container but the same luggage I’ve been importing for 15 years. I was then charged over $2,000 for this “privilege,” in addition to the 18% import duty I already pay.

This is not the first time I’ve had to pay for extra inspections that were unnecessary.

I understand the need for security but I’m a known importer of the same products for almost 15 years, and this is a terrible cost burden for my small company.

Excessive Social Security burden

Many years ago when I quit a perfectly good job to start my own small business, I was shocked to learn that I had to pay both my share and what had been my employer’s share of Social Security.

If you wanted to create the perfect disincentive to discourage people from taking the leap to start a small business or become self-employed, it would have been difficult to invent a better one.

Capital Gains taxes

So you’ve busted your butt for 20 or 30 years running a small business or sole proprietorship, now you’d like to retire and enjoy life.

Between state, federal and local taxes you’ve probably paid 50% or more of your income in taxes, but that’s not enough for politicians.

If you’ve been lucky enough to have created a business you can sell, now you’ll get to enjoy paying another tax on the capital gain from the sale.

It’s just another penalty imposed on hard-working folks by politicians who don’t think we are paying “our fair share.”

The word “entrepreneur” is endlessly tossed around by politicians who know nothing of how hard it is to be an entrepreneur. You all love to say you encourage entrepreneurship, but the reality is you stand in the way.

Most small businesses either fail or stay small because it is really hard to grow a business, and because of all the burdens you put on us.

Quit your job and try it yourself if you don’t believe me.

PS-

Click here to read about an NBA player who had his passport revoked by “The Hitler of the 21st century”.

Until tomorrow,

Simon Black
Founder, SovereignMan.com

The post How to Fix Inequality Without Guns  appeared first on Laissez Faire.