Politics, Taxes, And General Ignorance…

If you don’t want to hear another rant from me you can skip this blog entry. As the politcal season heats up towards November’s election day the tax rhetoric is being spouted by the party faithful on both sides of the aisle. By the end of this blog you will clearly understand which side of the aisle I am on and why.

Democrats are talking up the importance of letting many of the “tax breaks” and especially those of the “richest 1%” to fall back to previous increased rates in 2010. While we can debate all day long what constitutes the richest 1%, let me tell you that increasing capital gains taxes (Which will affect more than 100 million Americans) is a HUGE mistake, and increasing taxes on small and medium businesses is a mistake of epic proportions. Heres why.

If you were offered a check for $2500 (Lets call this reduced taxes, but assume it was immediate and you got a check for $2500) but in return taxes on small and medium business was increased 5-10% and capital gains tax increased 5%, would you accept the check? If I was dangling the check in front on you would you take it? Unfortunately 90% of Americans would. I can certainly understand why. People/families are hurting. $4 gas doesn’t help, and unfortunately financial discipline and financial knowledge is a not a resource that most Americans can count amoung their assets.

The issue is that increased taxes on small and medium businesses means less profits, and less profits means lower wages and decreased benefits. This is NOT rhetoric, this is undeniable fact. As these businesses, many of which are already struggling, try to fight competition and increase growth they HAVE to cut costs. Those costs are almost certainly going to make the working Americans life worse in every way. All of a sudden the $75K a year jobs are $65K a year jobs. Those 35K a year jobs go to 28K a year jobs. Those health care benefits go down every year as the cost of those same benefits increases.

It must be the greedy businesses that always want to make more money causing these problems right? In some few cases the answer is yes, but in the vast majority of the cases it’s because they are TAXED TO DEATH and the average American is the one who pays the price.

Whats worse is that all this is done in the name of the “Average American” – to help them, and to help them deal with the financial burdens that are sometimes too much to bear. It does give them very short term benefits (3 months maybe), but then reality sets in when wages stagnate or drop and health care is trimmed again.

Why can’t politicians see this? Why Why Why? There are really only two options. First, they want to pander to the general ignorance of most Americans when it comes to this matter even when they know better – or 2, they really don’t understand and they think that taxing businesses really will help the situation and make the lives of average Americans better. Either way they are wrong. One way, they are dishonest by pandering, and the other they are just plain stupid. There is NO THIRD OPTION!

I have run many businesses over my short 36 year term on this planet, but one thing I have learned having employed many hundreds of people over the years is that when I make money my employees make money. And when I don’t make money my employees hurt as a consequence because there isn’t enough to go around.


Matt Heaton / President Bluehost.com

17 Responses to “Politics, Taxes, And General Ignorance…”

  1. Jordy says:

    I couldn’t agree more, but rather than arguing who is going to carry the enormous tax burden, congress should be looking at places to make cuts. Deciding who is going to pay which portion only shifts the burden –it does nothing to alleviate it. If we want to see long-term prosperity, spending cuts will be needed across the board. Our taxation problems would mostly go away if congress just lived within its means.

  2. YES! Thank you. 100% Correct.
    You head a great company by the way. Better than all the rest by a mile.

  3. […] Matt Heaton gets it! Why doesn’t everyone else?Matt Heaton, is the president of Bluehost.com and he has written a nice post about why Congress should not remove the tax breaks on the “richest 1%” in 2010. […]

  4. “…increasing capital gains taxes (Which will affect more than 100 million Americans) is a HUGE mistake, and increasing taxes on small and medium businesses is a mistake of epic proportions.”

    You follow that up with an impassioned defense of not increasing small/medium business taxes:


    That’s fine — and Democrats aren’t talking about increasing taxes on small and medium businesses. The last tax they tried to get through was on oil companies — hardly a small business in the lot of those.

    But nowhere do you mention why a rollback on the cap gains cuts would be such a detriment. That was just stated without defense. And the “richest 1%” number is because we’re talking specifically about increasing taxes levied at those that make over $250,000 per year, and not at all on the middle class.

    There was a hubbub when the top tax bracket for income was cut from 90% to 70%. That was during JFK’s time — not long ago at all. Now that rate is at 39.6%.

    We’ve gone from having the lowest tax rates of the entire First World on our richest citizens forty years ago, to being so far away from second place we could double high-bracket tax rates and still be in first place today. And we have to pay for the same public services any other major country does — and for the largest, most advanced military in the world, to boot. I can’t bring myself to have much sympathy for the “don’t increase the taxes of the top 1%” argument. For the past half-decade, we’ve been taking four steps backward on tax rates and then fighting every one step forward. And it shows in the infrastructure — we have less money for internal security and pay rent-a-cops $7/hr to oversee airport security, we don’t pay our soldiers worth squat and ship them off to fight wars without proper protective equipment and then they come home to cut benefits and miserable hospital conditions, and the dollar weakens so much that foreign interests start becoming bigger employers in America than U.S. interests because our labor is cheaper to them. We’re becoming Mexico.

    Paying taxes is patriotic, and it keeps America strong. It’s about time we started respecting our nation with more than our words.

  5. Randy Wood says:

    Why don’t people realize that when business gets taxed, the taxes are passed on to the buyer as higher prices? Does anyone seriously think that business is going to absorb the increased costs?

    Like Matt Heaton says: if you financially oppress businesses, they hire fewer workers, pay rates stagnate, and some of the “poorest 1%” gets the short end of the stick.

    Businesses should be encouraged to expand and hire more workers — and that doesn’t happen by taxing them, but by unburdening them.

    And, I am not involved in “big business” so I can’t be dismissed as one of the “richest 1%” — not by a long shot.

  6. Obviously it’s option #1 — they’re dishonest.

  7. IMHO… government biggest profit always come from small to mid size companies, as these are usually comprise of local citizen that have no other choice but to conduct business locally.

    Unlike MNC companies or investor company, there are always advantage to draw them in. And thus, gov will not mean to kill them on entry.

    Bottomline is that, being rich is not innocent 😛
    So, be fair on tax… and reasonable.. thats drive the economy.

  8. Rob says:

    Couldn’t agree more.

    Here is how the capitol gains tax affects the middle class. You want to move your business and buy a small piece of property. You hope this gives you some payback later and will afford some financial independence for your family later in life. When you sell this property(or as in my case sell off a portion) you are taxed. The government took no risk when you purchased it, did nothing to help you develop it, but still takes a % of the sale price.

    If the tax had been more than 20%, let’s say 40%. I would have not been financially able to secure my property, I would have closed my business and 7 more people would be without jobs, health, dental & life insurance….

    Small business bears the brunt of the tax burden, ask anyone who runs one.

  9. Robert says:

    How True How True,
    The solution is a hand in the ‘FairTax’. It would be great if we all could shift the burden for government services to someone else. I belive the regardless of one’s station in life the that persons should share equally in t paying for the government services we all enjoy or must endure.
    There is hardly any government ill that would not be eliminated or at least improved if we throw our the 16th and tax code and move to the national retail sales tax.
    The tax code under Democrats and Republicans ahs become an instrument of social engineering in the hand of non-engineers.
    Give a break here or penalize this group using the tax collection process.

    The US economy does not stand a chance in the world markets if we continue to use the 67,000 page code as a guide.

    Cost of Paying Income Taxes

    American tax payers bear a financial burden over and above what they pay in federal taxes. This extra burden consists in covering the tax gap and both the time and money spent to comply with the tax code. For 2001 alone the 130 million Americans who filed tax returns paid on average $2,649 extra to fill the gap created by Americans who did not pay their share. This means that the tax bills paid could have been 32.1% LOWER! These 130 million compliant tax payers paid on average $8,265 when they should have paid only their fair share of $5,616.

    The compliance burden hangs like a huge stone around the necks of all tax payers. It consists of all the time and money wasted on filling out forms, maintaining records, studying tax rules and other tax-related chores. Since 1913 the tax code has grown from 400 pages to over 67,000. In 2005 individuals, businesses, and non-profits spent 6 billion hours and over $265.1 billion to comply with the tax code. The hours spent represent a work force larger than the combined populations of Dallas, Detroit, and Washington DC and more than the total of workers employed in the auto, computer manufacturing, airline manufacturing, and steel industries.

    Compliance costs are very regressive, hitting the poorest hardest. Adjusted gross incomes of less than $20,000 pay 5.8% of income while those of over $200,000 pay only 0.45%.

    Small businesses bear an unfair burden in compliance costs. As far back as 1991 corporations with under $1 million or less in assets (90% of all corporations) paid $382 in compliance costs for every $100 they paid in income taxes. Corporations with $250 million or more in assets paid about $3 in compliance costs for each $100 paid in income taxes. In 2004 the average American business taxpayer spent $894 per employee on tax compliance activities, but small employers (less than 20 employees) spent $1,304 per employee.

    The compliance costs for the private sector are 30 times what the compliance expenses of the IRS are.

    The FairTax plan in Congress would slash compliance costs. It would decrease the number of tax filers by 80%. The replacement of the income tax with a national retail sales tax would reduce compliance costs by 95%. This would reduce the cost of doing business and lower the prices of goods while enabling businesses to hire more workers and pay higher wages. It is a cruel hoax when politicians say they are going to raise taxes on businesses. The result of this is to decrease employment and wages and raise the prices businesses charge the consumers of their products and services.
    Check out http://www.fairtax.org for the real solution.

  10. Steven Burden says:

    We have the second highest corporate income taxes in the world. We used to have the lowest. The rest of the world has caught on to what spurs economic growth, job creation, and increased standards of living from us!
    That is why they are reducing the tax rates. To catch up with us.

    Exxon paid right about $30 billion in taxes last year. With their profits, it makes it about a 41% tax rate. That is more than nearly 50 million–combined–americans paid. But we all pay for it at the pumps.

    Small business is treated for tax purposes as a private individual. Taxing the supposed top 1% (or 5% or 10%) is simply taxing small business. That is our growth engine that provides new products, services and new jobs.

    So far as I am concerned, people shouldn’t even be able to vote if they don’t understand basic economics. Only problem is, the politicians would be the first to fail.

  11. The reason that this isn’t a more commonly understood concept is because you have an ill-informed general public being informed by an even more ill-informed news media. The people who write your news stories and sit behind desks at the major news networks didn’t go into Journalism after majoring in economics. Things like “supply and demand” and higher taxes on businesses means fewer jobs, and higher taxes on consumers’ incomes means they buy fewer goods/services (so in turn, there’s Really no reason to hire more people when business slows down) are all foreign concepts. Sometimes you’ll hear people tout the way it’s done in large European countries like France or Germany, but the reality is, a lot of those corporations are subsidized by the government.

  12. Randy Burke says:

    I look at the performance of our government during the last two administrations and it is very obviously tragic. I’m not an extreme liberal. I have a B A in political science from Cal State. I’m probably one of the people an above poster says should lose the right to vote because I don’t know enough. I’m writing from Sweden now where I spend four months a year. I also spend five weeks a year in the south of France. I also spent a week on the Lake of Constance on the German/Swiss border. All the citizens of these locations pay much higher taxes than Americans and I see everywhere I drive better living standards than I see in many many locations west of the Rockies.

    Are we going to continue to let the big corporations and an administration of liers continue to enslave the Amercan people? Yesterday I received a letter in my email signed by all the CEO’s of our major airlines pleading with Americans to write to their congressmen to put controls on the the rampant and rapacious speculation in the oil industry that is killing our country. So tell me these CEO’s are a bunch of pinko liberals. Today on all the news we’re getting it about Fanny Mae and Freddie Mack. Again rapacious greedy capitalists are killing the USA. Hand in Hand with the Red Chinese. Ain’t it ironic? Please people. Save your country and save your planet. Drop your Grand Old Prejudices. Moderate taxes, yes, lying to the American people . . . ENOUGH!

  13. SOG knives says:

    Interesting ideas… I wonder how the Hollywood media would portray this?

  14. Tax Guru says:

    I’ve been included in taxations for lengthier then I care to acknowledge, both on the individual side (all my employed lifetime!!) and from a legal stand since passing the bar and following up on tax law. I’ve provided a lot of advice and rectified a lot of wrongs, and I must say that what you’ve posted makes complete sense. Please uphold the good work – the more individuals know the better they’ll be equipped to comprehend with the tax man, and that’s what it’s all about.

  15. Greg says:

    I hate tax increases. Especially when I work so hard to make money.

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