Recently I had a conversation with my daughter about why she left her private practice and went to work for a large medical center. She said there were two reasons: First, it was very difficult to keep up with all the paperwork required to collect money from health insurance companies, and, second, there was too much risk involved.
Our family has been in small business for five generations in Utah. Growing up, I never considered not being a small-business owner. Not only is being a small-business owner the American dream, it is the pathway to the upper middle class economically.
On average, there are 540,000 new businesses started each year in the United States. Half will survive five years. Of the businesses that close, 34 percent are successful and close voluntarily and 66 percent fail economically. Not bad odds if you are in a craps game.
But in 2014, only 452,835 firms were born, according to the most recent U.S. Census Bureau data. Yes, there has been a long-term, 40-year decline in startups and the Great Recession was really a killer. Capital was scarce and the reward was overwhelmed by the risk. That is what my daughter felt.
Our country has been systematically flawed when it comes to entrepreneurship. For decades, big businesses have crafted policy that favors them over small businesses. They pay an effective tax rate of 13.7 percent on earnings while a small-business owner pays in the neighborhood of 29 percent. Their employee healthcare costs are 8 percent to 18 percent lower. Their cost of complying with regulations are 50 percent lower. Then there’s the “Walmartization” effect, where small business lacks the infrastructure needed to source goods from overseas. The startup culture has now permeated big business within their research and experimental divisions.
This pretty well capsulizes what’s been going on and the big question is, “Do we need to change?”
The only large organization I worked for was the U.S. Army and the lack of freedom was the pits. I was “born to be free.”
So, let’s see if we can’t change course and “make America great again.” The Trump supporters have the right idea. Their vehicle — Trump — is very questionable. But, in the big picture, that is very minor. By focusing on small-business tax reform, America will lead the world in more and better jobs. A great small-business tax policy will not only bring back strong economic development, but also a mindset that freedom trumps socialism.
My recommendation for small-business taxes is a flat-rate 15 percent of pretax earnings for businesses with one to 99 employees. Keep all the deductions and screw the short-term deficit. John Kennedy kind of did this and what a great time it was.
Kennedy enjoyed a miraculous economic turnaround. At the time of his death in November 1963, an employment boom was beginning that carried on until the mid- 1970s.
How about a GDP growing at 6.6 percent and an unemployment rate of 3.8 percent in 1966? Of course, Kennedy proposed other liberal ideas to Congress, such as increasing the minimum wage, expanding unemployment benefits, boosting Social Security benefits and spending more on highways.
I believe that if we get America to accept a 15 percent flat tax rate on small business, we can easily pay for those “liberal” ideas.
Yes, I was born to be free.
Robert Pembroke is chairman of Pembroke’s Inc. in Salt Lake City. He is vice chair of the United Way of Salt Lake, a member of the Salt Lake Rotary Club and a past recipient of the Utah National Guard Minuteman Award.