Sunday, April 04, 2010

Tax and Spend Is Killing Small Business

In New Jersey, private sector jobs were stagnant over the past decade - the first time in decades that this was the case, even as the state workforce grew (along with all the spending necessary - whether it was direct wages, pensions, and other benefits). All the state workforce growth was in state and local governments, and the private sector simply could not keep up with the taxing burden.
The current salary cost of this government expansion of employment is approximately $4 billion annually, using the U.S. Department of Labor’s average annual government pay of $57,179 in New Jersey (as of 2008, the last available data).

Assuming another 30 percent for benefits and overhead costs would bring the total to $5.2 billion.

At the same time, the private-sector’s total average annual pay declined by nearly $8.6 billion (-156,100 jobs multiplied by the average annual private-sector pay of $54,929). This translates into significant losses of state income and sales tax revenue.

The combination of the two has yielded the perfect fiscal storm.

The Great Recession, together with a very weak mid-decade (2003 to 2007) expansion has helped create the state’s deep budget hole. Between January 2008 and January 2010, New Jersey lost 245,400 private-sector jobs.
New York small businesses are getting taxed out of existence, because the tax burden isn't getting any easier with the latest round of taxes with the state scrambling to find revenues to close a multibillion dollar deficit.
A survey of 200 small businesses across the US by the economist found 51.5 percent of business owners in March were concerned about the viability of their businesses -- up from 49.5 percent in February. More than eight million jobs have been lost during the current 28-month recession.While a healthy 162,000 jobs were added in March, it was accomplished with the help of heavy government stimulus. Meanwhile, the average length of joblessness rose to 31 weeks and hourly earnings were down, albeit slightly.

In New York, interviews with more than a dozen small business owners by The Post found a group of owners hurting under the weight of the new taxes.

Teresa Kramer, co-owner of Northside Bakery in Greenpoint said she is scared.

"We'd really need to raise our prices by 20 percent to stay even because our profit margins are shrinking as costs keep rising everywhere -- for garbage and services, commuter taxes and other taxes," said Kramer, a Polish immigrant who operates the two-store division of Old Poland Foods. The business employs 20 and rings up annual sales of about $2 million.

Kramer has stopped short of raising prices, at least for now. She added: "We're producing more bread and product -- but we're still making less and less profit."

In Manhattan, Robert Schwartz, the CEO of a three-unit shoe store chain, said he has never seen the tax burden this bad.

"This has been as hard as we've been hit in my 36 years of running this company," said Schwartz, owner of Eneslow Shoes, which employs 50 people, including part-timers, on annual revenues of under $10 million. "It's a tough economy and our costs continue to rise."

Schwartz, who says he's putting his salary back into the business in response to the environment, adds that overhead from taxes and other outside charges have become unbearable. "I certainly don't think the new health care law will save me any money," he said. "Now New York City wants to develop this paid sick leave legislation that would give employees up to nine paid sick days. It's ludicrous. It takes the oxygen out of the blood."
It's a phenomenon that is expanding across the nation as states have few places to turn to find revenue to support existing state spending.

New York and New Jersey both have to deal with the core issue of job growth - both the expansion of the private sector and cutting back the government jobs that are simply overburdening all those who have to pay taxes to support a wholly unwieldy governmental burden.

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