The chairman and CEO of Travelers Cos., the insurer, Jay Fishman, has an op-ed piece in Bloomberg View asserting, "New small businesses, and the U.S. economy, would benefit significantly from a three-year incubation period during which they would face lower taxes, fewer regulatory requirements and fewer penalties for first-time and harmless paperwork violations."
This sounds good, but there are some issues that are not addressed in the piece. First of all, why not lower taxes, regulatory requirements and penalties for every business, across the board, not just on businesses that are new and small? Second, what's to stop businesses from just dissolving and reorganizing every three years to take advantage of the lower taxes and regulations available under Mr. Fishman's plan? And third, most startups don't pay much in the way of taxes until they are profitable, anyway, so the taxes aren't that much of an obstacle, or, if they are, there's already a bit of help for startups built in to the way that the taxes don't really kick in until profitability. I realize there are certain exceptions to this involving, say, employment taxes or state filing fees that are essentially taxes, but the general point still applies. Fourth and finally, the tax code is already ridiculously complex. Changes should be in the direction of making it more simple, not in the direction of adding complexity by creating an entirely new set of rules that applies only to small companies in their first three years of operation.
