The Hill

Why small business owners should fear the Sanders and Warren tax plans

By October 3, 2019 No Comments

(This post originally appeared on The Hill)

When considering the latest tax proposals from leading Democratic presidential candidates Bernie Sanders and Elizabeth Warren, there wouldn’t be any reason why a typical small business owner would be concerned, right? Both tax proposals are targeting people that are way, way better-off than we are. Aren’t they?

Warren is going after the wealthy at an individual level. Her proposal, as I wrote here, would levy a tax of 2 percent annually on individuals with assets more than $50 million and 3 percent on those with more than $1 billion.

Sanders’ approach is corporate. According to his recently-released plan, he wants to tax CEOs who make at least 50 times what their median worker earns and who work at companies with revenues of more than $100 million per year.

These are not small businesses. The typical small business owner makes about $70,000 per year and at best has a few million socked away. To say that we’re the targets of the Warren and Sanders tax plans would be misleading. I also don’t believe either candidate wants to punish small business owners. And why would they? Attacking the 30 million mom and pops, entrepreneurs and established operators who employ more than 50 percent of the country’s workforce would be political suicide.

And yet, when I speak to my clients and other entrepreneurs, I sense unease. This is anecdotal, of course, because the news of these tax proposals is too recent. But I bet that when the inevitable surveys start appearing in the next few months, that sense will be supported by data. Why would small business owners be fretful about the Warren and Sanders tax plans when the candidates are only targeting the very wealthy?

Sure, there are concerns that these taxes would likely create one of the largest re-distributions of wealth from the private sector to the government in U.S. history. There are concerns that both policies could cause an enormous flight of capital from the U.S., which would damage investments, the markets and the overall economy. There are others I know who argue about whether the candidates’ plans to spend the additional taxes raised on social programs, eliminating college debt or funding the dubious Green New Deal is truly in the best interests of the country. Those are all legitimate concerns and matters to be debated.

But there’s something else: fear. Both Sanders and Warren, through their tax plans, are sending a message that scares people in business, and not just the wealthiest. It’s a message that says: If you’re making too much money (however that’s defined), then we don’t like you and we don’t trust you.

They seem to believe that small business owners are just a lesser reflection of big business executives. Maybe we’re not making 50 or 300 times the amount of our employees, but yes, we’re making more, in some cases significantly more. If we’re somewhat successful, we’re probably driving nicer cars, living in nicer homes and taking nicer vacations. We come and go as we please. We golf. We give our kids summer work in our companies and overpay for their private schools and universities. We aren’t as bound to our companies’ rules and regulations because let’s face it, we’re the rulers of our own little kingdoms.

And we’ve earned that right. It’s our companies and our money, and we’re the ones who take the risks, collateralize our assets, get sued, fret over future work and deal with the pressures of ownership that ultimately results in us having to make the hardest decisions.

But our employees don’t really see it that way. Regardless of our relationships, to them we’re as guilty as the rich people that both Warren and Sanders are targeting. No, we don’t have the kind of money that those people have. But we have the same type of hierarchal power that they do. To many of our employees, that’s the same.

Both Warren and Sanders – by attacking the wealthy, Wall Street, bankers and CEOs – are not just attacking big businesses. They’re attacking what all business and entrepreneurism represents: Profits, owners vs. workers and yes, good old fashioned American greed. By using the “1 percent” as their representation of evil, these candidates are forgetting that, in our little bubbles of the small companies we run, we’re also the 1 percent. Our employees see that. And – given the opportunity – they would resent it.

That’s what scares us. Is that a reasonable fear?

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