How policy affects entrepreneurs
Published in the Boulder Daily Camera, 10/26/10
As we head into this election cycle, one of the central issues we must decide is the extent to which we go forward seeking a larger government role in society. Of course, growth in government brings an associated need for higher taxes, and, as many have said, this has consequences for business and individuals. As a successful Boulder entrepreneur who is now being directly influenced by these issues, I thought it might be illuminating to tell my story.
I am 56 years old, have a doctorate in engineering, and have lived in Colorado for 30 years. Probably most importantly for this discussion, I'm one of those entrepreneurs and former small-business owners that everyone seems to talk about. In 1984, my wife and I started a high technology business, Micro Analysis and Design, in our garage with nothing but an idea and lots of enthusiasm. Over the next 22 years, we built a company that employed 100 people, most of these jobs in Colorado, and all of them the coveted high technology "knowledge" jobs that everyone wants to see more of. Along the way, we created products and provided services that earned my company awards for innovation both nationally and locally. Additionally, our company received many awards for being one of the most "Family Friendly small businesses" in Colorado. I am pretty sure that the company we created represents exactly the kind of product of entrepreneurial spirit that most politicians, Republican or Democrat, talk about. Four years ago, my wife and I sold the business, allowing us to retire comfortably if that is what we should choose.
However, once an entrepreneur, always an entrepreneur and I think that the skills we acquired building our company could be put to good use again. And, I have a good idea for a business in the residential solar thermal technology sector that I am ready, able, and have been preparing to pursue.
Unfortunately, the evolving tax and regulatory policies that the current administration and Congress are promoting are extremely discouraging. The math is simple -- if I go into business, any profit that the business makes will be first taxed as ordinary income at, all things considered, a tax rate of about 49 percent. Furthermore, because of our success in business, my wife and I won't spend what we've already earned, much less what we might make in a new business. So, the profit that we would get to keep after income taxes would go into our estate that, upon our death, would be taxed by the estate tax at another 55 percent. The bottom line is that, of all of the profit our new business might generate, only about 23 percent would go to our heirs. So, we would assume 100 percent of the investment of time, cost, and risk of starting and building a business and, should it succeed, our family would get to keep less than a quarter of what we would earn. While the rewards for growing a business certainly go beyond earnings, the fact that such a large portion of the earnings would be so heavily taxed has all but buried our entrepreneurial spirit, along with the future jobs and technology that this business might create.
After hearing this story, which I assure you, is being repeated thousands of times around the country, I ask you to consider this: would you start another business and make the effort and take the risks needed to create more good jobs if you were me?
Entrepreneurs generate the growth and jobs in the American economy. As I hope the reader can see, mine is not a story of greed, but a story of how government policy can affect the motivation of the very people that, as a society, we seek to motivate. Without a vital and motivated entrepreneurial community, the American Dream will fade, not just for the wealthy but for everyone, rich and poor. Government policy matters and I hope you consider this as you head to the polls over the next few weeks.
Ron Laughery, of Boulder, is the founder and former President of Micro Analysis and Design, Inc.
As we head into this election cycle, one of the central issues we must decide is the extent to which we go forward seeking a larger government role in society. Of course, growth in government brings an associated need for higher taxes, and, as many have said, this has consequences for business and individuals. As a successful Boulder entrepreneur who is now being directly influenced by these issues, I thought it might be illuminating to tell my story.
I am 56 years old, have a doctorate in engineering, and have lived in Colorado for 30 years. Probably most importantly for this discussion, I'm one of those entrepreneurs and former small-business owners that everyone seems to talk about. In 1984, my wife and I started a high technology business, Micro Analysis and Design, in our garage with nothing but an idea and lots of enthusiasm. Over the next 22 years, we built a company that employed 100 people, most of these jobs in Colorado, and all of them the coveted high technology "knowledge" jobs that everyone wants to see more of. Along the way, we created products and provided services that earned my company awards for innovation both nationally and locally. Additionally, our company received many awards for being one of the most "Family Friendly small businesses" in Colorado. I am pretty sure that the company we created represents exactly the kind of product of entrepreneurial spirit that most politicians, Republican or Democrat, talk about. Four years ago, my wife and I sold the business, allowing us to retire comfortably if that is what we should choose.
However, once an entrepreneur, always an entrepreneur and I think that the skills we acquired building our company could be put to good use again. And, I have a good idea for a business in the residential solar thermal technology sector that I am ready, able, and have been preparing to pursue.
Unfortunately, the evolving tax and regulatory policies that the current administration and Congress are promoting are extremely discouraging. The math is simple -- if I go into business, any profit that the business makes will be first taxed as ordinary income at, all things considered, a tax rate of about 49 percent. Furthermore, because of our success in business, my wife and I won't spend what we've already earned, much less what we might make in a new business. So, the profit that we would get to keep after income taxes would go into our estate that, upon our death, would be taxed by the estate tax at another 55 percent. The bottom line is that, of all of the profit our new business might generate, only about 23 percent would go to our heirs. So, we would assume 100 percent of the investment of time, cost, and risk of starting and building a business and, should it succeed, our family would get to keep less than a quarter of what we would earn. While the rewards for growing a business certainly go beyond earnings, the fact that such a large portion of the earnings would be so heavily taxed has all but buried our entrepreneurial spirit, along with the future jobs and technology that this business might create.
After hearing this story, which I assure you, is being repeated thousands of times around the country, I ask you to consider this: would you start another business and make the effort and take the risks needed to create more good jobs if you were me?
Entrepreneurs generate the growth and jobs in the American economy. As I hope the reader can see, mine is not a story of greed, but a story of how government policy can affect the motivation of the very people that, as a society, we seek to motivate. Without a vital and motivated entrepreneurial community, the American Dream will fade, not just for the wealthy but for everyone, rich and poor. Government policy matters and I hope you consider this as you head to the polls over the next few weeks.
Ron Laughery, of Boulder, is the founder and former President of Micro Analysis and Design, Inc.
