Earlier this month, we watched as Members of Congress, Senators and President Obama congratulated themselves for striking a deal to avoid the so-called “fiscal cliff.” But did we really avoid it?
I’m sure by now most people have received their first “post fiscal cliff” paycheck. And I suspect that many of them aren’t too happy about it.
My employees, and I’m sure a lot of other people, didn’t realize just how much their tax bills were going to rise as a result of the grand bargain that Mr. Obama and the rest of our leaders in Washington seem to be so happy about.
I realize that the payroll tax hike our leaders in Washington approved in January might not seem like much to a six-figure lobbyist or highly paid government worker, but it’s causing a lot of financial strain for the average Joe Sixpack struggling to make ends meet.
A lot of politicians have tried to make it sound like this tax hike was small and insignificant, and that most of us wouldn’t even notice it. But I beg to differ. The across-the-board payroll tax hike that President Obama and congressional leaders signed off on in January has a profound effect on everyone, particularly small businesses.
As a small business owner, we see price increases on almost a yearly basis. We try to absorb as many of those as we can, so in turn we can remain competitive with our pricing. But thanks to this tax hike, we will have to find some way to swallow a tax hike and those year-on-year price increases. And I can assure you, that isn’t a small or insignificant task for any small business. That’s because we can only absorb so much and continue to operate the business before some of those increased costs get passed along to our customers.
Now let me paint a picture of this scenario. The great new year of 2013 is upon us. As we receive our first pay check of the year, we notice that there is a portion of our check missing due to the tax increase. As we go about our daily routine, we start finding higher prices for goods and services that we need.
Call it the “Double Whammie” effect: Paychecks and profits are smaller, and everything costs more. I don’t know about you, but I don’t like how that picture looks.
The payroll tax hike also creates a new hurdle for increased hiring and job creation. How am I supposed to hire more workers when my costs for doing so just went up? When it costs me more money to add a person to my work force than I gain in prodcutivity, what incentive is there for me to do that?
Margins are tight to begin with during these tough times, and lets just say that adding a new employee isn’t the top item on the agenda for an employer who just got hit with a tax hike.
But none of that matters to politicians in Washington, who seem both unable and unwilling to get control of the runaway government spending causing our fiscal and economic woes. For them, it is politically easier to raise taxes on all of us than it is to restrain their spending.
When government can’t control their spending, they raise taxes. But what they forget is that those tax increases end up costing small business owners and their employees the most.
President Obama and Congress may think they have staved off the “fiscal cliff” – but they did it by pushing the rest of us closer to our own personal financial cliff.
Todd Rodenburg is a native of Colorado, a graduate of Green Mountain High School, and the co-owner of Green Mountain Auto World, Green Mountain Xpress Lube, and Green Mountain Shell. His family has continuously operated a small business in Lakewood since 1974