Bringing Down the Wage Payer

By Kyle Stallings

“You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.”

William J. H. Boetcker

We need to spread the wealth around.”
Presidential Candidate Barack Obama

For the past 29 years, I have been a self-employed businessman.  During that time I have known sacrifice, anxiety, recessions, price collapses, commodity cycles, stressful competition, uncertainty and setbacks. I have faced banking challenges, sleep-depriving debt, heart-breaking disappointments and self-doubt.  For the first 10 years of the adventure my family lived in small rent houses and drove old cars, and I officed in class C office buildings or out of my home. However, I wouldn’t trade a day for the lessons that I learned about thrift, long-term goals, deferred gratification, perseverance, never-never-never giving up and faith. I have experienced the American dream.

For the past 15 years, some might consider me successful, but no one familiar with my story would call me an overnight success.  My partner and I provide well-paying jobs for 13 people. We deliver a stable financial return to the 100 private individuals who invest in our partnerships.  Our small company generates millions of dollars in annual business activity. The multiplier effect of our activities impacts hundreds, if not thousands, of people. I now pay a fortune in sales taxes, payroll taxes, property taxes, severance taxes and income taxes in eight states, in addition to federal income taxes. To insure that I am in compliance with the complexity of the tax code, I also pay accountants and lawyers. The cost of compliance is actually just an added tax.

My little story is shared by millions of other small businessmen in this wonderful country. We are entrepreneurs. We think about our small businesses every waking moment. We worry about our clients, employees, banks, investors, vendors and competitors constantly. We wake up in the middle of the night to write down a thought that might help us improve our service. We worry about how we are going to navigate through this recession without laying off long-time employees while still providing the level of excellence that will be needed to survive.

Now I am told that I am the problem. Even though I am among the 1% who shoulders 40% of the federal tax burden, I am the one who is not paying my fair share.  When President Obama talks about raising taxes on citizens earning over $250,000, he explains that “we can’t afford to give tax breaks to millionaires and billionaires.”  Only in Mr. Obama’s America does $250,000 of earnings confer inclusion into the billionaire club.  The president seems intent on inciting class warfare as he mischaracterizes fledgling entrepreneurs and business owners as robber barons.  We have become targets of derision and contempt.

Now I labor under a president who systematically targets and demonizes almost every sector of the private economy while insisting that his measures will “help small business.” President Obama has scorned medical, pharmaceutical, insurance, financial, energy, automotive and fast food industries. Is his knowledge of the American economy so limited that he doesn’t comprehend that these sectors are populated by small enterprises? The president likes to say that his policies are good for “mom and pop” businesses, but his agenda of government health care, increased taxation, cap and trade and compulsory unionization will suffocate small companies. I believe that he is far too intelligent to sincerely believe that his policies are “pro-small business” in any sense of the term.

How could anyone who has known even one or two small businessmen have such animosity toward the entire demographic?  Then I realized that President Obama has never known anyone like me. Shockingly, his primary frame of reference with businesspeople seems to have been with felons or the wealthy elite. Prior to becoming a political superstar, Mr. Obama’s most notable business associate was Tony Rezko, who helped arrange a very curious land deal that resulted in the Obamas living in a home in Chicago’s Kenwood Addition that they otherwise would not have been able to afford. (Mr. Rezko has now been convicted of fraud, attempted bribery and money laundering).  After ascending to the halls of power, Mr. Obama likes to associate with the super rich such as George Soros (the man famous for breaking the Bank of England). No wonder he has such little appreciation for legitimate small businessmen. His limited experience has taught him that business people are either shysters or billionaire currency speculators. Who cares about them?

Therefore, I would like to introduce Mr. Obama to an entire segment of the citizenry that he evidently has never met. Below is my open letter to the President.

Dear Mr. President,

Mr. President, please allow me to introduce you to America’s small business owners. They reside in every state and town in the country. These men and women are the backbone of the communities where they live.  They represent the 20% that do 80%. They are the ones who serve on school boards and hospital boards, coach Little League, lead Boy Scout troops, serve in Indian Guides and volunteer in their churches and synagogues. They pay a disproportionate share of the property taxes that build the public schools and hospitals. They give generously to local charities and United Way, buy the uniforms for the Boys & Girls Club basketball teams and make anonymous gifts to send underprivileged kids to summer camp.

You may not care about the community service and enrichment activities that mark the lives of so many small businesspeople. But did I mention that the 29 million small businesses provide 144 million jobs (55% of the jobs in this country), creates 66% of all new jobs and generates over half of the private GDP? Since our country is in the midst of a recession that you say is “the worst economic downturn since the Great Depression,” I assume that the health of the engine that sustains employment might be of some concern to you. However, your proposed tax increases upon the “rich” will land squarely on small businesses like a ton of bricks.  You see Mr. President, 66% of those who earn above $250,000 are small businessmen. I understand that you believe that business owners are rich predators who “need to give more,” but have you considered the effect of your policies upon their employees? I respectfully direct you to Boetcker’s warning that “you cannot lift up the wage earner by pulling down the wage payer.”

As a businessman facing the prospect of higher taxation, please allow me to personalize the likely effect upon my own small enterprise. First, you must understand that taxes are a direct deduction from my bottom line and capital reserve. Why is this important? Every dollar you subtract from my bottom line is a dollar I cannot use to give raises, increase benefits or add employees.  Although this may appeal to your “spread the wealth” instincts, it may not be such good news to my current employees or to job-seeking college graduates. Every dollar you take from my capital reserve is a dollar I cannot invest in new property or equipment. This may satisfy your sense of “shared prosperity,” but will not be as heartwarming to my suppliers or to those hoping to market assets next year. Is this beginning to make any sense to you?

The decision to increase my taxes will of course also reduce my disposable income. This will result in fewer dollars allocated to consumption which, ironically, you say is critical to the economic recovery of the nation. Although you may be delighted that I won’t have as much discretionary money to travel, buy a condo at the beach, or remodel my home, those employed by the airlines, mortgage companies, real estate industry and the construction trades may not be as cheery. And though you may be pleased to see me mowing my own lawn and cleaning my own pool again, it may not bring as much joy to my long-time contractors, Bibiano Ortega and Gina McDaniel.

We have observed your tendency to punish your “enemies” and borne witness to your willingness to use executive power to sanction certain industries. Your unwarranted drilling moratorium that has decimated the oil and gas and service sectors in the Gulf States provides a recent example.  This policy has already created more unemployment and inflicted more economic carnage on small businesses in Texas, Mississippi, Louisiana and the other gulf states than the actual oil spill could have ever done.

Finally, Mr. President, let me assure you that we have nothing in common with your friend Tony Rezko and we bear no resemblance to your benefactor George Soros. After laboring all of my adult life in the private sector, I know a thing or two about real entrepreneurs. First, we were made to innovate and risk capital to support our dreams and visions. But we will only do so when we feel that the rules of the game are fair and predictable. Secondly, we will not put our hard-earned money at risk if we feel that the portion absorbed by taxation is too great. Lastly, when we sense an animus toward us from the highest office in the land that questions our motivations, integrity and patriotism, we begin to take defensive measures, not increase our investments. I hope this letter provides you with a more accurate view of who the real small businessmen in this country are. And I hope it helps you realize the destructive consequences of your policies on the small businessmen you profess to support.

Kyle Stallings is the Managing Partner of a small oil and gas investment company in Midland, Texas and serves on the Governor’s Business Council of Texas.

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