Editor’s Note: The following opinion piece was provided by Andy Coyle, a resident of Laguna Beach, Calif., and a longtime RV dealer in Southern California, to the Riverside Press-Enterprise. It was published on Saturday (Aug. 29).
I am going to share with you one typical month in the life of a California small-business owner.
Business owners deal with the consequences of laws passed by state and federal governments. I own a recreational vehicle dealership with sales this year of less than $7 million. We provide sales, service, parts and storage to our customers and have been in business 17 years. Our business grew steadily until the current recession. We have shrunk from employing more than 70 employees to 14. We have experienced a devastating decline in business because we offer a discretionary product and we are located in San Bernardino County, the center of the housing bust.
All these factors make just surviving extremely challenging, and that’s before adding the damage done to our business by our government. Huge obstacles Listed below are some of the obstacles I have encountered in the last 30 days doing business in California. These obstacles are mandated by the state and federal governments.
The American Recovery and Reinvestment Act, also known as the “stimulus” bill, forces small businesses like ours to prepay extended Cobra health insurance benefits for employees terminated this year. We will eventually reimburse ourselves by applying for a tax credit. That means my small business is lending the federal government approximately $10,000 for each Cobra-eligible employee. Do the math: number of terminated Cobra employees x $10,000 = huge cash outlay.
What’s the solution for a small-business owner? The short-term solution is for our company to eliminate the company-provided insurance plan and avoid the Cobra liability. The unintended consequence of the “stimulus” bill is that companies will be forced to terminate insurance plans, leaving more people without insurance. What government should do is remove the restrictions on insurance sales between states so that free-market competition will drive down costs and increase the choices available. We do not need the government to tell us what to do, we need government to open up the insurance industry so we have more options to choose from — our choices, not the government’s dictate.
As one of the privileges of being a business owner in California, I am required to collect taxes and fees for the state. The undisciplined Legislature has been balancing the state budget for years with gimmicks. The June sales tax advance payment is a gimmick that requires small businesses to prepay sales tax 45 days early so that the money can be “pulled ahead” into the new budget. This gimmick provided a one-time revenue gain that small businesses now have to finance every year.
In an average month we collect $50,000 in sales tax for the state. In June of each year we have to send an extra $25,000 as an advance payment. That $25,000 is critical working capital that I use to operate my business. When the state takes $25,000, it restricts the growth and stability of our business and that leads to fewer sales, less employment and less tax revenue collected.
Our legislators are now considering adding even more hurdles for vehicle dealers. They must have decided that the current economic environment was not challenging enough. Legislation has been introduced that would increase overhead costs for dealers by raising the amount of the dealer bond, by removing protections provided by corporate law and by adding more rules on how dealers process sales transactions.
This continuous assault on small businesses will have grave unintended consequences resulting in even fewer sales, more unemployment, less sales and payroll tax income and ultimately even more businesses leaving California for states with a more business-friendly environment.
Because of very generous and favorable legislation endorsed by the trial attorney lobby, we are frequently named in RV manufacturers’ “lemon law” lawsuits that are little more than thinly veiled shakedowns by buyers who have fallen on hard times and are looking for a way to escape from the loan obligation.
Normally the manufacturer of the RV will pay to defend these lawsuits, but these are not normal times. More than 50% of the RV manufacturers have gone bankrupt, leaving us to defend these lawsuits. For many small businesses, defense costs could be the “final straw” to force them into bankruptcy or just closing down.
These are just four examples of the obstacles created by government that a typical small business owner is forced to deal with every day. As business people, we should be focusing our efforts on productive activities related to providing service (sales, advertising, marketing, personnel, planning and training) rather than distractions imposed by government.
Legislation pending in Sacramento would pile additional burdens on RV dealers and other small-business owners.
Finally, here is an overview on how much money we collect (in an average year with sales of $7 million) for various branches of government:
- Sales tax: $610,532
- License fees: $38,352
- Payroll taxes: $78,191
- Property tax: $51,114
- Total: $778,189
These taxes and fees that we collect in the normal course of business do not include the additional taxes employees pay when they spend their money, or when they pay their income taxes.
The point of all of this is to show that several things need to change for small business to lead the economy out of this recession:
- Put money into the hands of consumers and small-business owners by reducing all types of government taxes.
- Stop adding to, and begin removing, the layer upon layer of government rules, dictates, and restrictions that impede small business growth.
Government growth always results in business decline. Every dollar spent by government is one less dollar that the private sector spends. Every dollar spent by government results in less than one dollar reaching the public because of the inherent inefficiency of government. Every dollar spent in the private sector has a multiplier effect throughout the economy.
As a small business owner I am reminded every day that our state and country have taken a turn down the wrong road. A free market economy made this country what it is today and it is a key component in our personal freedom. A free market economy is far more efficient than a system of government redistribution controlled by special interests. We, individually, make better choices spending our own money than the government ever can. I have more faith in the American public than I do in government benevolence. Americans can reverse course by telling their elected officials to stop the ever-growing government intrusion in our lives.