Taxes Keep Unemployment High

Posted by Pete Nofel on Sep 1st, 2010.

Despite signing the American Recovery and Reinvestment Act in February 2009, unemployment has remained high.

One of the basic tenants of a successful horror movie is to never let the audience get too good a look at the monster. People always imagine something worse than can be displayed on the screen. Take the original version of “The Thing from Outer Space.” It isn’t until the heroic humans fry the Thing — James Arness [Marshall Dillon] — that we get a long look at the monster.

A bit more recently, the alien in “Alien” is never fully seen until Ripley dumps him — it? — into space. That’s in the last 10 minutes of the film.

It’s the uncertainty of what is after people that makes the films so scary. That’s part of what is keeping the Great Recession going: uncertainty, especially in small businesses. Business owners are worried about not only what the economy may hold in store, but also how the government is going to stick it to them.

How will new EPA carbon emission regs affect a business? What will be the intended and unintended consequences of a 2,000+ page healthcare bill do to employee and employer costs? What will be the result of new taxes?

These, and other, uncertainties cause shop owners to take a look at their balance sheets and see a government-fueled Thing or Alien ready to kill the business. What owner, in his or her, right mind would step off that cliff of uncertainty without knowing if the fall is going to be six inches or sixty feet?

In the August 9, 2010, Wall Street Journal, a business owner writes about his uncertainty in “Why I’m Not Hiring” – http://online.wsj.com/article/SB10001424052748704017904575409733776372738.html.

This New Jersey business owner estimates that a 12-year employee with a nominal salary of $59,000 cost him $74,000 in taxes and benefits, yet she only nets $44,000. Where does the other 40.5 percent go? It goes to federal, state, and local taxes paid by both the employee and employer, along with each’s share of healthcare coverage.

Grossing 74k per year in pay and bennies means the employee is worth $6,166 per month. If taxes and benefits eats $30,000, that means she’s working almost five months of the year for nothing but support of governments and payments of benefits.

There’s also the confirmation that the uncertainty factor for employers is growing. The article’s author states that his healthcare provider jacked up rates by 28 percent for lesser coverage, where in the past, increases were less than 10 percent per year.

In this kind of economicly punishing environment it’s no wonder that small businesses aren’t hiring and that unemployment remains at a stubborn 9.5 percent.

The irony is that even sucking $18,000 away in taxes from both the employee and employer, cities and states are crying about how broke they are and the federal government has conveined a commission to figure out how to reduce the deficit [I'll be betting they'll be recommending new taxes rather than cutting expenses].

So, with an unknowable monster breathing down the neck of business, it’s little wonder there’s no hiring and not much prospect for a recovery. It’s time to shed some light on the hidden monster of government rapaciousness and let business know what’s in store by telling government to stop reaching into our pockets with both hands.

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