Fire the Developer!
September 8th, 2008 Posted in Community, Start-Ups, politicsIn my last post I asked the question of what expenditures I should eliminate in order to pay for higher taxes under an Obama presidency.
Many readers were actually surprised that a small business owner would expect his tax costs to increase though Obama has said, and said, and said, and said, and said some more that he would raise taxes.
A well-respected techie who is a huge Obama supporter DM’ed me: “interesting post, I don’t know your bracket, but the cuts work pretty much across the board. Obama specifically mentioned startup.” Cuts? Across the board? Mentioned startup? Dude, Obama has explicitly told us that he will increase taxes on the biz owner who buys your ninja dev skills. I’d throw my hands up in the air but then couldn’t type!
One reader made the point that though taxes will increase they would do so slowly and therefore the small business owner won’t feel the impact of those higher costs. Using the same logic one shouldn’t mind being raped as long as the act is gentle.
A somewhat loquacious commenter thought my tax planning needs improvement – pay myself dividend income instead of payroll income. Smart by half. With dividends the business owner gets slapped once on the corporate return and then again on his personal return. The employer still pays its half of FICA. The reader’s logic is further eroded as Obama promises to increase the dividend tax rate from 15% to 20%. On top of that capital gains taxes will go from 15% to 25%. There is no escape!
One person contended that Obama’s free health care for small businesses will offset the higher taxes – problem solved! My thoughts on national healthcare. If you think healthcare is expensive now, wait until it is free.
The bottom line
In the end only Lance Weatherby gave an answer: fire the developer. His advice is sound, rooted in years of business experience – stick to my core business of helping companies with their employee benefits; the one that has proven to earn a paycheck. He suggests that I should abandon my glorious vision of becoming a high-powered dot com success and close down my start-up.
I’m not necessarily smart enough to take Lance’s advice (Andrew Lunde can relax for now), but know that I have to keep that arrow in my quiver.
5 Responses to “Fire the Developer!”
By Me:) on Sep 8, 2008
SARAH! SARAH! SARAH! SARAH!
By Mike Schinkel on Sep 8, 2008
@angus: “One reader made the point that though taxes will increase they would do so slowly and therefore the small business owner won’t feel the impact of those higher costs. Using the same logic one shouldn’t mind being raped as long as the act is gentle.”
That’s quoted totally out of context. The full context was “EVEN IF taxes did increase later, OTHER aspects of an Obama’s (vs. McCain’s) platform will more than offset those potential future losses, and sooner than the taxes.”
IOW, life doesn’t let you conveniently focus on only one variable. Life has many interlocking variables and if you willingly deny the other variables you prove yourself to be no more evolved than the ostrich with its head in the sand.
@angus: “The employer still pays its half of FICA. The reader’s logic is further eroded as Obama promises to increase the dividend tax rate from 15% to 20%. On top of that capital gains taxes will go from 15% to 25%. There is no escape!”
I’ll give you I’m no tax expert, so I may well have had that wrong. But where is your acknowledgement of the Obama plan to eliminate capital gains on small businesses and startups? You’ve continued to ignore that point?
Bottom line, and trying to be respectful, it seems to me you simply believe in the Republican brand and institution and you distrust the Democrat brand and institution. If that’s right then all debate is moot anyway. Am I right, or would you potentially vote for a Democrat?
(FWIW, I’m an independent and *would* vote for a Republican over a Democrat if I respected their positions.)
By Angus McRae on Sep 8, 2008
Mike – Again, thanks for keeping me on my toes.
I don’t recall whether or not I was referring to one of your comments in the first point you make above. Suffice it to say that incrementalism is an often used tactic in politics. I think my point still valid.
The “mentioned startup?” link addresses Obama’s promise to eliminate capital gains taxes on startups and “small businesses.” Reconcile that, however, with the fact that he is increasing capital gains taxes on individuals making above $250k.
This is the main point of my original post: Where does START Atlanta and ATA want to get their seed and angel capital from? From a dude earning less than $250k? I think not.
I’d contend that all that the average Obama supporter heard were the words “start-up,” “cut,” and “capital gains tax.” They then collectively sighed in wonderment and did not drill down to better understand what was being offered.
Lastly, I am neither a R nor D, but a conservative. And, in this day and age I’ve not seen any conservative D’s. Hell, it’s hard enough to find one with an R after his name!
By Lance Weatherby on Sep 8, 2008
Angus, you raise a very interesting point that I had not considered before. In order to purchase stock or enter into the type of debt agreements used by technology startups one has to by law be accredited investor. An accredited investor has to have either a net worth of over $1 million or $200k in income. I am eager to hear details of Senator Obama’s tax proposals for people that invest in startups. If he is really going to eliminate capital gains on startups for the people that have the capability to invest in them regardless of how successful the startup becomes he may just get my vote.
By Aarjav on Sep 10, 2008
Lance, the exact words he used were
“I will eliminate capital gains taxes for the small businesses and the start-ups that will create the high-wage, high-tech jobs of tomorrow.”
It’s hard to make the argument that that could mean capital gains taxes for anyone other than startup investors (not many startups I know invest in anything other than developing a product). But since this is politics, it best to read the fine print. Let me know if you find any more details. (I haven’t been able to, so far)