Alan: Running a company is never easy and you know, this show at American Dreams talks about pathways in life. And I had a guest come on once and say “In life there is no path, but it’s really the path is created by the series of choices that we make and the consequences that follow.” And so I wanna step back into the mind of the entrepreneur specifically when you stepped in and became part of insynctive, you know, there was a transition that that involved. From the founder and you taking the reigns as the CEO, but in the process of scaling a company, what are some of the biggest challenges that the entrepreneur faces?
Gary: Well, I look at it as it’s not a straight line to success. And that success or nonsuccess is determined by the quality and number of people you have surrounding yourself. And having been in this business, that was one of the components that was really key and critical for me in order to take on this opportunity with the entrepreneur. And having the mindset of putting together a series of milestones that achieve your goal is what’s critical so that you have measurable results that you need to achieve. And every time you hit those results, you know you’re on track to get to where you need to go. And one of the things I’ve learned in the past is that you’ve got to get the company to break even in order to have a real company.
Anyone can get into trouble with the IRS, including businesses. It seems as though entrepreneurs are especially susceptible to tax troubles, many times because they simply aren’t aware of all the tax pitfalls that lay ahead. However, many of these mistakes can be easily avoided. The key is to be aware of what they are.
One of the most common mistakes is simply to be too relaxed and nonchalant with your recordkeeping and compliance. Always keep complete and accurate records and always stick to all the tax rules. Don’t get lazy and think it won’t matter. It does.
Another mistake is to try to fight every battle with the IRS alone. While you can take care of many tax items and issues yourself, other situations and circumstances are better left to the professionals. For example, if you have been chosen for an audit or you have a large tax debt, or other serious tax matter, then seek the help of a qualified CPA or an attorney.
To that same end, don’t make the mistake of trying to avoid the IRS. If you hear from the IRS respond as directed. Trying to run or hide never works, especially if you’re already on the agency’s radar. Avoiding these simple mistakes can be a real lifesaver for anyone with a business, especially an entrepreneur that’s trying to start a company.
Raise taxes on big business! That’s the cry of democratic lawmakers. Democrats argue that keeping the corporate tax rate high will help increase income for workers. While it’s true that wages have basically remained stagnant over the last decade, and the cost of living has gone up, increasing corporate taxes is not the answer to solve this problem.
According to a study by Kevin Hassett and Aparna Matur there is a link between corporate taxes and employee wages. That study revealed that the common belief that customers end up paying for corporate tax increases is incorrect. In reality when corporate taxes go up, it’s the workers and not the corporations or the customers that end up paying for the increased taxes.
However, despite the evidence to the contrary, many politicians continue to scream for higher taxes on big corporations, claiming that this will help boost wages and increase employees’ income. Many in this camp also want to punish any company that moves overseas or that keeps more income in offshore subsidiaries in effort to avoid these high taxes.
Unfortunately, this kind of thinking will only serve to hurt the average American instead of helping. According to Hassett and Matur “workers become more productive when they acquire better skills or have better tools. Lower corporate rates create the right incentives for firms to give workers better tools, and more productive workers earn higher wages.”
Just about everyone is aware that California has one of the highest tax rates in the country. So it wasn’t much of a surprise when voters passed a temporary tax increase back in 2012 that raised the state’s marginal income tax rate to 13.3 percent at the top level. That meant that the state’s wealthiest taxpayers had a combined tax rate of 52.9 percent.
Although many threatened to leave and many others feared a mass departure, the exodus from California among the wealthy never really materialized. While some of the state’s wealthier individuals did leave for other locations, studies showed that “millionairetax flight is occurring, but only at the margins of statistical and socioeconomic significance.”
In fact, while California did see an overall loss of about 625,000 residents between 2007 and 2014, the state saw a net gain in college-educated residents. So even though more people have moved out than moved in, the rate of individuals with a higher tax rate has not experienced a major change. However, could that change if those temporary tax rates are extended or made permanent?
There is a current proposal that would extend the tax increases another 12 years, and many believe if it passes then the same group would seek to extend it again or even make it permanent. If that happened would the wealthy then be more prone to leave the state? No one knows the answer for sure, but if the tax increases are extended it will be interesting to watch how the scenario all plays out.