I am a big fan of entrepreneurship. I consider myself to be an entrepreneur, albeit on a small scale. Entrepreneurship gives a person great freedom to take their work in a spiritually-fulfilling direction. I am not suggesting this is easy, but at least when you are working for yourself, you can consider options that would not be possible if you were working full-time for someone else.
Only a small percentage of people in the workforce venture out on their own. I think there are a lot of people who would make great entrepreneurs if they would just give it a try, but too many are unwilling to give up the security they perceive to be getting from their current employer.
Plus, there are a number of other things that hold people back. Being an entrepreneur is not only risky, but it is difficult because the culture, including its tax laws, are really set up more for employees than self-employed people.
Here are two suggestions for lawmakers to create a more entrepreneur-friendly culture:
First, give self-employed people parity with employees on FICA. When you work for someone else, you are required to pay 6.2 percent of your income for Social Security. But if you leave your employer to start your own business, you have to pay both the employer's and the employee's portions, bumping the tax up to 12.4 percent. This is a huge disincentive for many people who might otherwise consider striking out on their own. Government should give self-employed people the option of paying only 6.2 percent, commensurate with a corresponding reduction in benefits in their retirement years.
And second, don't discriminate against small business owners and self-employed people on health insurance. An employer can deduct the expense of the health insurance he or she provides employees, but the business owner cannot deduct the portion of the expense used to purchase insurance for him/her self and family. In other words, the cost of the business owner's health insurance has to be included in the business owner's income for tax purposes. Employees get health benefits without paying taxes on them but if you own a business, that health insurance counts as compensation and is taxed just like a paycheck. Health insurance already is a huge stumbling block for would-be entrepreneurs. It is pretty tough to go from a company-provided health insurance plan to one that you have to fund completely on your own.
Small businesses provide a large portion of the jobs in this country, as well as a lot of the innovation. Lawmakers should do all they can to encourage people along entrepreneurial paths.