Wednesday, August 18, 2010

Job Creation

America's small businesses create over 75% of all new jobs. Yet the small business community is the sector of the economy which has been hit hardest by the current recession. Clearly the best way to create new jobs is to do all we can to bring the small  businesses  community back to good health. As someone who has owned and successfully operated a number of small businesses in Southern Arizona over the pasts 30 years I offer a few practical suggestions.

Historically, during difficult times,  government has come to the assistance of large corporations by offering tax breaks and incentives. Oddly, the government never offers the same tax breaks to small businesses. I suggest that we should consider offering two specific tax breaks to the small business community. One aimed at new business start-ups. The other aimed at existing businesses which need funds to expand. For the new business start ups I propose that we waive taxes on profits for the average period of time it takes a new business to get over the hump and become self-sustaining. That period of time is about three years.  For small businesses which are over that hump and ready to expand I propose that we set up a type of business IRA  which would allow small business owners to set aside up to 50% of their earnings every year into a tax free account over a five year period of time. Such tax free funds could then be withdrawn at any time during that five year period only for the express purpose of business expansion - such as the purchase of new equipment, marketing, expansion of facilities, etc..

I believe both of these proposals would help solve the biggest challenge most small businesses face. Namely the inability to obtain financing from banks, or investors. In order to make these tax breaks revenue neutral I propose that we use the money we will save by allowing the tax breaks for the super rich to expire to cover the cost of the tax breaks to small businesses. The argument that tax breaks to the wealthy create new jobs
is not valid.  Wealthy individuals seldom use their personal income to create jobs, with the possible exception of hiring illegal "nannies" to take care of their children..

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