The Little Engine That Could
Oct 23, 2012
The Little Engine That Could: A great children's story and a great reminder of the importance of small businesses in this country. As the owner of a small business with 22 employees, I am downright concerned about my ability to continue long term with the looming risk of new taxes and regulations around the corner.
During the Vice Presidential debate regarding future taxes on the rich, Vice President Biden, in response to the effect of future taxes on the rich and its impact on small business, stated that 97% of all small business in this country would not be effected by these taxes because they do not take $250,000 gross income. Republican Party Vice President nominee, Paul Ryan, announced that over one million small businesses would be directly affected. I think they both have it wrong – I think the amount of small businesses that will be affected is in the millions.
My business is located in San Francisco, one of the most expensive US cities to do business in, and a tax on those earning $250,000 gross would directly affect every small business renting retail space from us. That means the small café, the deli, the neighborhood restaurant, the dry cleaner and the shoe repair shop all fall within the tax bracket. I know this because I am a commercial real estate broker.
With an average of 1,500 square feet of space needed for a retailer and a general neighborhood rent of $3.00 per square foot, per month, the average retailer is paying $4,500 per month in rent. In order to survive, a retailer cannot pay more than ten percent of their gross income on rent - meaning that the average retailer is making $450,000 a year or more. Under the current tax increase proposals at both Federal and State level these local businesses are considered our rich.
The income tax increases are not my only concern; the new health care and future regulations on business could be the nail in the coffin for a number of small businesses. A small business that relies on customers coming through the door has no way to take on the proposed costs and regulations except by raising the price of their goods and services. As a country we cannot afford to see costs added to goods and services at a time of such need for an economy recovery that will, in turn, create more jobs.
I understand that we have dug ourselves an enormous financial hole in this country. Our local towns and cities along with our state and federal government are in trouble with higher and higher debt and are in need of more funding to keep the doors open. However, the answer is not to kill the producer - the small business owner. They have been and can continue to be the 'Little Engine' that can move this economy forward and we must do what we can to incentivize people who wish to take the financial risk of starting a small business - not tax and regulate them out of existence.
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Written by: Hans Hansson
Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 27 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email firstname.lastname@example.org or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.