It seems appropriate that in the same week that Atlas Shrugged premiered at the movies, Westgate Resorts CEO David Siegel sent a letter to his 6,500 employees warning them that the burden of taxes and the constant demonization of successful businessmen is reaching the point where he may decide it is no longer worth it to continue the hard work that he put in, building his company from the ground up over the past 42 years.
Siegel recounted the years of sacrifice, long hours, and hard work that went into making his business a success. Now he finds himself attacked for that success and is being crushed under a growing burden of taxes and regulation. “State taxes, federal taxes, property taxes, sales and use taxes, payroll taxes, workers compensation taxes, and unemployment taxes” take half of everything he earns. And President Obama is threatening to impose even higher taxes on him and his business. If that happens, Siegel warns, “I will have no choice but to reduce the size of this company. Rather than grow this company, I will be forced to cut back. That means fewer jobs, less benefits, and certainly less opportunity for everyone.”
He isn’t quite ready to head to Galt’s Gulch, but Siegel pointed out that he doesn’t need to continue putting in 60-hour weeks to keep a business running. If government continues to punish his success, he told his employees, “My motivation to work and provide jobs will be destroyed, and with it, so will your opportunities. If that happens, you can find me in the Caribbean sitting on the beach, under a palm tree, retired, and with no employees to worry about.”
At about the same time, Arthur Allen, president of ASG Software Solutions, sent a similar letter to his 1,300 employees, saying that the increasing burden of taxes and regulations could force him to sell his business, and that such a sale would almost certainly result in the loss of hundreds of jobs. Allen said that he had been fighting off takeover attempts for years, but that he didn’t know if he could continue to do so in the face of the current administration’s policies.
Some businesses are not waiting. For example, the restaurant chains Olive Garden and Red Lobster announced last week that they were going to move many of their workers from full-time to part-time because they cannot afford to provide the health insurance mandated under Obamacare.
Elsewhere, nonfinancial businesses are reportedly sitting on more than $1.7 trillion in liquid assets that they are not investing. There is a reason why so many businesses are, in effect, choosing to shrug rather than to put their resources to work building new plants and hiring new workers.
President Obama seems to believe that it is possible to love workers but hate employers. Both rhetorically and in terms of policy, he seems to believe that he can punish the 1 percent without harming the 99 percent. In reality, however, employers and workers, the 1 percent and the 99 percent, are inextricably tied together. The success of one brings opportunity and success to the other.
The president assumes that if someone is wealthy, his or her money just sits there, doing nothing. Much better, therefore, if the government takes that money and puts it to use. In reality, of course, individuals either spend that money or save and invest it. If they spend it, it helps provide jobs for the people who make and sell whatever it is they buy. If the money is instead saved and invested, it provides the capital that is needed to start businesses and hire workers.
If reelected, President Obama seems determined to push for higher taxes on the wealthy, businesses, and investors. The president has called for raising capital-gains taxes, which will discourage business investment and expansion, and, of course, a huge hike in federal income taxes for those earning more than $250,000 per year. Such a tax hike will not just hit many families that are far from “rich,” but will fall especially hard on small businesses and Subchapter S corporations, which often file taxes as individuals. And we should not forget that U.S. corporations already pay the highest business tax rates in the world.
At the same time, businesses also fear the repercussions from our $16 trillion debt. In fact, if one includes the unfunded liabilities of Social Security and Medicare, this country’s real total indebtedness could exceed $130 trillion (in current present value). Measured as a percentage of GDP, our total debt exceeds the total debt of Greece or Spain. Any business owner looking down the road can only anticipate that he will soon face higher taxes, rising inflation, or further economic stagnation. This certainly doesn’t look like an opportune time to invest in or expand a business.
And new regulations are about to hit as well. Both Obamacare and Dodd-Frank are winding their way toward full implementation. And the specter of “cap and trade” remains lurking over the horizon of a second Obama term.
Unemployment may finally have slipped slightly below 8 percent, but we are far from a healthy and prosperous economy. The real unemployment rate, including those discouraged from seeking work and those who can only find part-time work, is 14.7 percent. In fact, if the labor-force participation rate were at the same level it was four years ago, the unemployment rate would be 10.7 percent. Economic growth crawls along at an anemic 1.7 percent. Real household incomes are down $4,500 since January 2009.
That is pretty much the inevitable outcome of a policy that treats business success as the enemy.