Tax Reform Proposal Gets Mixed Reviews From Small Business Owners

The Republican-backed tax proposal announced last week addresses concerns of some small business groups but also raises questions that it could create a tax loophole for wealthy people.

The proposal would change the way some company owners — sole proprietors, partners and owners of what are called S corporations — are taxed. They report business income on their individual 1040 forms and under current law, can be taxed at a rate up to 39.6 percent. Many small business advocates have long objected to the fact that some of these owners pay a higher tax rate than corporations whose rates currently top out at 35 percent.

Under the GOP proposal, the tax rate on the businesses known as pass-throughs would be 25 percent. The corporate rate would be 20 percent.

Small business advocates were split over the plan. The National Federation of Independent Business welcomed it, but others objected.

“The current proposal leaves a disparity by offering pass-through entities a 25 percent tax on business income while dropping the corporate rate to 20 percent,” said Todd McCracken, CEO of the National Small Business Association. “We hope to work with tax writers to find ways to close that gap.”

The pass-through provision has already encountered criticism among Democrats who say it would enable wealthy Americans to structure their finances in a way that would dramatically lower their tax bills. Sen. Ron Wyden, D-Ore., said it would allow hedge funds to “to convert ordinary income into low-rate pass-through income.”

The NSBA was happy with some other proposals, including an end to the estate tax, which can force the heirs of company owners to sell a business or place it in debt in order to pay the government.

The Small Business Majority said the plan would not help most small companies.

“The current top rate is paid by less than 2 percent of pass-through business owners. Nearly 9 in 10 businesses that pass through their income already pay at the 25 percent rate or less,” said the group’s CEO, John Arensmeyer.

The plan would simplify business taxes, encourage business investment and increase owners’ confidence, the Small Business & Entrepreneurship Council said.

“High confidence will drive investment, risk-taking, bigger economic growth and wage growth,” said Karen Kerrigan, the group’s CEO.

The overall tax proposal faces an uncertain path through Congress although it has the backing of GOP leaders and President Donald Trump. Another provision in the overall plan that is being criticized is a proposal to eliminate the deduction for state and local taxes.

OPTMISTIC ABOUT TRADE

Small and mid-sized U.S. businesses that export their goods and services generally anticipate healthy growth in their overseas sales in the next five years. That’s the finding of a survey of 501 exporters released Monday by American Express.

Seventy-seven percent of the exporters who took part in the survey expect revenue from overseas sales to increase in the next five years, on average by nearly 30 percent. International trade is a significant part of their business — on average 36 percent of annual revenue comes from other countries.

Global economics and politics are a concern to these companies, with nearly 80 percent saying changing economics is a significant challenge. Thirty percent said Britain’s planned exit from the European Community will make them more cautious about international trade.

The survey, which questioned companies with total annual revenue between $ 250,000 to under $ 1 billion, was conducted in August.

PAID SICK LEAVE

Rhode Island has become the eighth state to require employers to give their staffers paid time off when they’re sick. Gov. Gina Raimondo signed a bill Thursday giving staffers at businesses with at least 18 employees three days of paid sick leave in 2018, four in 2019 and five in 2020. Workers can also use the time to care for ill relatives.

A growing number of states and cities have enacted laws that give workers paid sick leave, which is not required under federal law. Rhode Island’s neighbors, Connecticut and Massachusetts, also have sick leave laws, as do Vermont, California, Oregon, Arizona and Washington state.

–The Associated Press

Tech

4 Lessons I Learned From My Years as a Child Laborer

One of my first entrepreneurial encounters was during my years as a child laborer in Turkey. (Don’t worry, I’m exaggerating. It wasn’t really that bad.)

In fifth grade, I was tasked with selling rugs and flooring to farmers who came to sell their produce at the local farmer’s market in a small town by the Black Sea. I like to think that my boss hired me because I was an extra cute kid, but it probably had to do with the fact that by that time I was already on my third job, so I actually had enough work experience.

My boss — a family friend and a superb salesman in the tradition of the great Turkish rug dealers of Istanbul’s Grand Bazaar — gave me some sales (read: haggling) training and then left me to run his shop. I still retain those thousand-year-old lessons to this day.

Lessons like these four:

1. Know who the decision maker is.

I remember on more than a few occasions haggling with a farmer over a rug and getting to the point where the deal was almost official — only to have the farmer’s wife come along and tell him to stop fooling around in the rug shop and go buy some flour instead.

Haggling (or negotiating for you modern business types) with the wrong person is an exercise in futility. Even the person who controls the checkbook might not be the one who has ultimate say in a decision, so clarify that you’re talking to the right person.

Ask questions like: “Who do you need to speak with about this before you make your decision?” or “Is there someone that we need to include in our discussion?”

2. Know your mission.

The farmers I was selling to rarely had a lot of money to spend. If they were buying a new rug or some new flooring, there was a reason for it. It was my job to find out that reason and adjust my haggling accordingly. There’s a big difference between wanting to buy flooring that is easy to clean versus flooring that goes with the drapes.

Whether it’s a partnership, a promotion or a merger opportunity, you must know your counterpart’s needs. Start by asking: “If money was not an issue, what would you like to accomplish with this deal?”

3. Make people feel something.

When haggling, I almost never talked about the rugs. They were fine quality, beautifully crafted and reasonably priced, but a vital lesson my old boss taught me was to focus on the person and connect with them.

If they’re haggling with you, that means they already see value in your product. To get the price you want, you have to connect emotionally with them.

Negotiation expert and author of Start With No Jim Camp argues that people make decisions with their emotions and then justify those decisions with their analytical mind. So, when negotiating with people, try to establish an environment where they feel like you genuinely care about their needs. If you don’t connect with them on an emotional level, it automatically makes them approach the negotiation from a more analytical mindset, taking away an edge for you.

4. Focus on your behavior and actions.

When I first started selling rugs, I had many a potential customer walk away shaking their heads and calling me “impossible” (and various other things). I would set a price in my head and absolutely not budge from it — until my old boss budged me.

“Pala,” he would say, “don’t be a donkey. Be nice and be a little bit flexible and people will give you a fair price.”

Camp backs up my old boss on this one. Rather than zeroing in on the absolute outcome of the negotiation, he says, control what you can, like your behavior and actions, and your negotiations will go a lot smoother.

More importantly, you’ll consistently get better outcomes. You may not be able to hit a home run every time, but you can focus on your swing and it will increase your chances of hitting one.

From the bazaar to the boardroom, having sound negotiating skills will help you in nearly every facet of business, even if you’re a fifth grader.

Tech