One thing America definitely does right - the promotion of entrepreneurs
|London (c) Koen Dougterloigne|
In a translation for a film university, the author (confidential information) discusses how a society must have the correct structure if it wants to encourage entrepreneurial independence:
Wenn eine Gesellschaft, die über nur wenige Bodenschätze verfügt, ihre Menschen in den Mittelpunkt wirtschaftlicher Zukunft und Prosperität stellt und möglichst viele in die unternehmerische Selbstständigkeit begleiten will, müssen die Strukturen stimmen.
If a society that has only a few natural resources places its people at the centre of its economic future and prosperity, and wants to support the entrepreneurial independence of as many people as possible, the structures must be correct.This is one of these topics that usually leads to cliches about the need for incentives or the culture in which failure and reinvention are socially acceptible. That's all fine and well, maybe even necessary, but there is a much more basic reason for why America has an ideal structure for entrepreneurs. This is again a topic that requires some knowledge of the international community, some comparison. The entrepreneurial advantage in America can only be understood in relation to other countries, especially countries in the European Union. So what it is this great advantage in America:
THE TAX CODE
|New York (c) Perypatetik Media|
You don't think so? You probably hear all about how corporations pay some of the highest taxes in the world? Although you are aware that the extreme wealthy like Warren Buffet or Mitt Romney, etc. pay very few taxes. Forget all of that. What is the situation in the "real" world, what's it like for an average guy with a small business? How does this compare with other countries?
Let us take a glimpse at what is purported to be a country with one of the highest tax rates: Germany. If you are a freelancer or self-employed person, you pay income taxes that are comparable to what we have in America. They may be a little higher, but then your standard of living is too. But these differences are minimal and their valuation subjective.
But what if I'm a self-employed person and want to start a business? The first two questions I ask myself in this situation are: i) what changes? ii) by how much? Obviously if you hire an employee, you have his salary and the taxes on top of that salary. Again, roughly speaking, these costs are similar in both Germany and America. But what if you don't plan to hire anyone? You outsource all the work you can't handle yourself? This is where America has allowed and continues to allow an enormous loophole relative to other countries: a US taxpaying owner of an LLC or S-Corporation only pays takes on income, whereas e.g. in Germany you would pay corporate or business taxes on your profits and then also taxes on your income. That is a huge difference. That's the different between paying 20-25% taxes as a self-employed person and jumping to around 50% with a company. Obviously, many freelancer can't afford that or have to incur huge losses in the early years. In America, we don't have that problem.
As I have written elsewhere, average independent parties have to think more creatively, take advantage of their position, be creative and not even think about multinationals, let alone imagine competing with them. As I wrote in response to criticism of publicity for our volume of transpositions, it is totally absurd.