Friday, September 19, 2008

How to Jumpstart the (Estonian) Economy

There's a great post by Blog Maverick, serial entrepreneur Mark Cuban: "How to Jumpstart the Economy - Tax Free Small Businesses". Although the post is meant for American politicians, it gives ideas well suitable for Estonia as well. In Estonia, Reformierakond has been very consistent demanding continuing with reductions in income tax during the slowdown in our economy (though, less so recently). As Mark notes:
The one thing I know with certainty is that at no time prior to starting a company did capital gains or income tax percentages ever impact whether or not I would start a business. As any entrepreneur will gladly tell you, you have to have income before you are taxed, so how much you pay on your earnings is a good problem to have, and a better problem is how much you have to pay on capital gains.
What has impacted my decision on whether or not to start a business is the amount of paperwork involved and the local, state and employer taxes involved.
After comparing the costs of doing business in Internet and real world, he suggests a solution for pushing forward the economy and entrepreneurship:
No taxes of any kind on small businesses with 25 or fewer employees. No employer payroll tax. No state or local taxes. No taxes on earnings. Nada. The business owners will pay income taxes on their personal income they pay themselves, but not corporate earnings.
The only taxes they would collect and remit are sales taxes, the employee’s portion of payroll taxes and of course they would still file personal income taxes on their individual earnings.
Make this available only to individuals, and only for a single company (to prevent gaming the system by having multiple 25 employee and under companies).
The impact on the economy would be amazing and immediate. Those without jobs would be able to work for themselves, they would be able to join together and start companies.

Read the whole piece, think about it, and lobby your politician-friends.

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