aceventura3

Another way to look at the issue is in terms of the general life cycle of a business. Think about a business like Microsoft as an example. They currently employ about 90,000 people world wide. It is unlikely that Microsoft is going to have significant job growth (organic - or growth based on the natural growth of the business as opposed to acquisition) in the future. But to get to 90,000 employees, Microsoft started with two employees, Gates and Allen. Like most companies that make it to "big business" status they grew into it starting as a small business. When a "big business" matures the growth of new employment stops or declines. Even the small businesses that don't get to "big business" status goes through a growth cycle. They start, they grow (new employment), they sustain (no employment growth), they die or get swallowed by another business (decline in employment).

The sweet spot in employment growth is in having a thriving economy with growing small businesses.

Example - Employment Law. It is very complicated, I am not an expert, I don't have an HR Department, retaining lawyers costs money, but I have to do everything perfect or a single error can cost me my business, I have to spend a lot of time staying on top of all of these issues. I have no interest in breaking the law, however, abuse is on both sides. I have had people file false claims of discrimination, false claims for unemployment, false claims for workers compensation. As a small business no one comes to my aid, I get no help, I fight fraud on my own.

I am in the insurance business, I provide services for insurance companies.

PS - One thing I didn't include in my OP.

Assume everything works out I hire a good employee. Not actual numbers but let's say the employee gets paid $50,000/year, it costs me $75,000/year, and the employee helps me generate an extra $100,000 or a net profit before income taxes of $25,000.

First, that employee comes to me and says - "hey give me a raise, I made you $100,000 and all I get is $50,000, it ain't fair" (under his breath - "you greedy capitalist pig"). But wait, if I have a "C" corp, that $25,000 gets taxed and then if I take money out of the "C" corp it gets taxed again on my 1040. So that $25,000 may end up being $10,000. And now that employee says give me a $15,000 per year raise or I quit. What do you think I say?

Or if it is an "S" corp that $25,000 goes straight to my 1040 as payroll income or potentially self-employment income, either way subject to personal and payroll taxes, phase outs and all other "tax the rich" (even though I aint' rich) schemes. Again, what do I say? Basically, I say its been nice knowing you - and if you find a job paying you what you want, put in a good word for me because I won't be far behind you, I just have to turn -off the lights and sign everything I have over to Uncle Sam.

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