Tax Less – Give More

money umbrellaThe big gift under the Christmas tree for most Americans this year was the 2018 Tax Code for individuals and businesses. Santa has not delivered a gift this significant for U.S. taxpayers for over 30 years. Most of us are happy he made it down the chimney.

To explain in our blog what’s included in the bill, and how it is likely to affect you and your business, would be redundant. Plenty has been written in the press and online. An article that we found to be easy to understand comes from The Motley Fool. The impact of the Bill is explained in layman’s language and we especially like the tables. According to the Fool, a few interesting individual deductions will soon be history. These include theft losses (no need to fill out that pesky police report), unreimbursed employee expenses (no incentive to bring the boss a Starbucks latte), moving expenses (it now pays to stay in one place), and employer-subsidized parking (no problem for us whose office happens to be in the suburbs).

For corporations, the GOP-proposed Bill is exciting. Businesses can sell worldwide without double taxation, and if you’re one of the those businesses who made money overseas but couldn’t afford to bring money into the U.S. because of taxation, it’s good news.

Read the entire article (really, it’s a good one).

Of course, not everyone is happy. Parents who sacrificed so their kids could go to college won’t get the $2,500 tax credit and charities are all wondering whether the goodness of the average American wage earner will be “as good” if they aren’t able to deduct charitable donations. We believe that generosity and compassion, more than a tax deduction, drive American giving. Next year will be our litmus test. In the last election, according to Pew Research Center, 54% of us Americans voted, but 60% of us gave to charity.

Charitable giving, in all its forms, transcends politics. Giving is as American as apple pie and will remain that way regardless of our politics, tax rules, and financial forecasts.

Interesting Trivia About Taxes

Whether you’ve already filed your taxes or your deadline is still looming, it’s seems to be unAmerican to love the IRS.

When Pew Research surveys the 150 million or so Americans who file returns, about whether they love, like, or hate doing their taxes, one-third report that they actually like or love doing taxes because it means getting a refund. And some just take pride in being good at filling out all the forms! I guess we could say that we also fall into the latter category!

Of the other remaining two-thirds, most say they simply don’t like it and 25% of this group hate doing their taxes. It does not take a great deal of imagination to choose which group pays the most on April 15.

Most of us know that the U.S. tax system began in the 1760s with the protest against British tax policy, but did you know that the first items for which we paid taxes were whiskey and glass windows? At first, the new Americans paid federal taxes on land and commercial building. The first personal income tax was enacted in 1861 to pay for the Civil War. As we all know, once the war was paid for the Feds found a reason to keep collecting. In 1913 the 16th Amendment was ratified and we’ve been paying for more wars and more reasons ever since.

It’s interesting that the government has never taxed charities or religious bodies, no Value-Added Tax (but we hear rumblings) and there have been no export taxes or taxes on trade between the states.

For us, when tax season is over, we breathe a sigh of relief but we also feel good about the job that we did for ourselves and our customers…every detail closely scrutinized to pay the least amount of tax legally owed.

As Morgan Stanley once quipped in an ad, “You must pay taxes, but there’s no law that says you gotta leave a tip!”

The Most Difficult Time of the Year

Andy Williams would have us believe that the Christmas season is “The Most Wonderful Time of the Year.” Small business owners are reading quite the opposite—that holiday shopping is stacking up to be just shy of dismal, maybe the weakest in years.

Kiplinger’s Economic Outlook forecast for 2016 has unemployment falling below 5% to 4.5% and inflation rising to 2.3% from 1.1% in 2015. They predict crude oil trading in the $40 range and retail sales up only 0.2%. The bright news was sales of single-family homes rising 20%. Good news if you’re in the building business. Read the whole report.

Small businesses can survive 2016 by adapting quickly to market shifts. We recommend keeping aware of your competition to see who struggles in these shifting market conditions and position your business to take up any slack. It’s also smart to maintain your cash flow during weak months and avoid borrowing. Plan to increase efficiency and become a leaner, more efficient operation, ready to move quickly when markets improve.

Our survival tips include:

  • Manage inventories carefully but don’t lose sales because of it.
  • Monitor cash flow and income vs. expenses constantly.
  • Discipline expense spending and eliminate unnecessary expenses.
  • Don’t let collections get out of control.
  • Consider delaying capital expenditures so you have money to expand quickly when the economy picks up.
  • Aggressively seek out new business and forge new relationships.
  • Increase or at least maintain advertising in order to outsell those whose cut back.
  • Provide excellent customer service, and stress value with customers.
  • Motivate employees to participate in lean times tactics and create employee incentives for good ideas.

Practice these key suggestions and you may find 2016 a remarkable personal achievement.