The Big Issues for Small Concerns

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Herrera: My biggest concern is taxes. After 10 years of building my business, I'm finally at the point that I'm making some profit. But guess what? I have to go and get a loan to pay my taxes. Maybe I should have done more advance planning, but still, there has to be something that helps small businesses with this dilemma.

Batterson: Yeah, I agree. Add to that the blizzard of tax forms you have to fill out and the additional taxes you have to pay local and state governments. There are just too many taxing agencies and entities for small businesses to deal with. I just had a shock earlier this year. We had a nice capital gain on an investment, and my accountant calls me and says, "Oh, guess what, the state of Illinois passed some new tax on capital gains that I never heard of and, by the way, that's going to be $70,000."

Schroeder: In addition to the tax burden that you both talked about, the burden of preparing all these various forms and tax filings on a timely basis is overwhelming.

Cory: Just to give you an idea how onerous this is, last year alone there were 37 new federal and state regulations that affected small businesses. It's a nightmare. You have to hire advisers and CPAs to help you. Then you have to pray they make no mistakes.

So what would you suggest to help solve the problem?

Herrera: A moratorium on certain taxes until a company is profitable.

Hasty: One possible solution is not to tax a certain base of equity. This would help start-ups a lot. It would help emerging companies reinvest cash back into their businesses and stimulate growth. For it to work, the Federal Government and probably the state governments would have to set some sort of cap or float ceiling noting where that tax would start and how it would rise. It would probably have to vary by industry, because some businesses are more capital-intensive than others.

Tom, you have said the so-called death tax is an issue you're tracking. Governor Bush has vowed to abolish it. (At press time, the U.S. House of Representatives had voted to kill it and was waiting for the Senate vote.)

Schroeder: The death tax is probably the single most poorly understood and inconsistently applied tax we've got in this country. It's really a tax on success, which I think is contrary to what the U.S. is all about. I mean, we want people to develop businesses, then pay income taxes as they go along and earn income. Then suddenly, at their death, after they've built this big successful company, Uncle Sam wants to take a piece of it. Family heirs often lose these business legacies because of the high taxes. And most don't do enough estate planning and are totally unprepared.

Batterson: I've been going through this in my own estate planning right now, and it is quite a shock. The numbers that you're going to have to pay in taxes range from 37% to 55%.

Considering all the tax burdens, do you feel the government is at odds with the little guy?