Friday, October 1, 2010

The Rich Paying Their Fair Share: Business Owner Perspective

I get tired of politicians including Obama talking about the rich "paying their fair share" as if the rich currently aren't paying their fair share. Obama seems to believe that the only way people get rich is by stealing the money, cheating poor people out of the money, or obtaining the money through a get rich quick scheme like hitting the lottery or unexpectedly striking pay dirt with a book (like he did).

In reality, most rich people don't become rich that way. Most people become rich by starting small businesses, sacrificing short-term gains for long-term satisfaction many times over, working long hours for many, many years, and finally getting to the point where Obama would say they are "rich." Along the way, they pay taxes, create jobs, create additional tax revenue from the people who's jobs they've created, and so on.

I am a small business owner myself. The business I created provides jobs for 18 people. These are 18 people who pay taxes and contribute to society. In this economy they might very well be on government support if I hadn't created the business that provides their jobs.

In addition to the social benefit of creating jobs, my company will pay about $130,000 in payroll taxes (social security and medicare), and my employees will pay another $130,000 in payroll taxes out of the money my business pays them. My business pays another $50,000 in state and local B&O taxes. The employees pay another $900,000 in federal income taxes and roughly $70,000 in local property taxes. In total, my business generates about $1.3 million in tax revenue, plus sales tax, vehicle taxes, and other miscellaneous taxes that we haven't counted.

This is why small business owners like myself resent Obama saying we are not paying our fair share. In my case I took on the risk of starting a business. I failed three times before I found the business that actually became successful. I put my family finances at risk when I hired my first employee. I still put my personal savings and house at risk when I sign for business loans. I put in the long hours to make the business a viable concern. Over the past 20 years I've gone through periods of a year or more four times when I drew $0 in salary, because each time I thought that was the best investment in the future of myself and my company.

My business has not been a get rich quick scheme. It has taken 20 years of focused effort and sacrifice to get to the point where I am now considered to be rich. The median household in America pays about $7000 in payroll taxes and personal income taxes combined. The business I created generates tax revenue equal to 185 average households. The business I created is in essence carrying 185 other households on its back, and I don't mind that one bit--except when Obama tells me that I'm not paying my fair share.

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