Tales from a third-world state of America

In these once-great united States of America, one state long ago led the way toward freedom. (No offense to you, Virginia; you produced magnificent radicals. But Massachusetts was first to kick ass.)

More recently, that state has been leading the way toward third-world status — beginning with plundering the productive and promoting corrupt cronyism.

I have friends who are unfortunate enough to live in Massachusetts and who, for various reasons, can’t leave.

One of those, a small business owner, wrote me two doleful emails last week about his problems with both the local plunderers and those national vandals, the IRS. He gave me permission to combine them into this cautionary tale and publish it on the blog.

To preserve what little privacy they have left, I’m calling him John and his wife Abigail, and changing the name of their company. Otherwise, the tales are the unvarnished truth.

Here are the messages from John. Read ’em … and worry. What destroys the entrepreneur eventually destroys us all.

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November 4, 2010

Abigail has been working on renewing our health insurance for our business, AmericanEnergy. Calling Obamacare a nightmare doesn’t begin to describe it. Our premiums have been going up over 20 percent a year for several years because of Romneycare, which is the template for Obamacare.

This year, [with the first provisions of ObamaCare kicking in] it’s jumping over 25 percent. I’m looking at paying over $100k for insurance for a firm with six employees. Our lowest-paid employee earns $35k a year but she just turned 60 so her insurance will cost me over $25k. We don’t get the small business tax credit Obama rattles on about because we pay our people too well; [under the tax credit] only low-paying jobs are welcome. Our premiums are high in part because several of my employees have kids, who are now graduating college and not getting jobs. We were expecting to drop from family to couple coverage for everyone over the next few years, but Obamacare extends kids coverage until they are 26. I get to pay for it.

Our practice of buying a high-deductible policy and then reimbursing employees for the deductible has been made illegal; I have to hire a third party firm to do the reimbursement. We’re required to buy prescription drug insurance, mental health insurance, substance abuse treatment, and so forth. We have to offer no-deductible coverage for health clubs and spas, a huge list of therapists and counselors, smoking cessation, etc. I have to pay for that even though none of my employees smoke.

I could go on for several pages, but what’s the point? We both know the new congress won’t repeal this mess; they’ll just tinker with it to help out the people they favor. Which is never me or people like me.

Another small business up the street from us just announced they are closing. It’s a restaurant that sells traditional foods at reasonable prices. They’ve been here for 50 years. The town has been ripping up the street in front of our offices and on their street for the past 4 years. Sewage improvements. But somehow they need to dig up and re-pave 13 or more times. I’m not exaggerating, I was keeping count last summer but lost track after 12. There are four different construction sites on the road where this family restaurant is located. Since ripping up the road last summer, it can take over an hour to go 2 miles. Everyone avoids it. Their business was doomed from the moment the eternal construction began.

The cops are making a fortune on paid details. Some days I can count 10 or more blue costumes from my office window. The backhoe drivers and pavers are doing great. Thank god we don’t require customers to come to us or we would be doomed as well. The 50-year old family restaurant that is going under is the 14th or 15th small business to fail in the past two years within a mile of my office.

I’m not sure we’ll last another year. Abigail and I will be OK but I feel bad for my employees and their families. I just can’t afford to pay $100k insurance premiums when my annual revenues are $800k. Add in the new taxes, fees, mandates, etc., plus more falling off of business as the economy is destroyed, and I think the odds of AmericanEnergy being around for 2012 are less than 50 percent.

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November 5, 2010

Abigail and I just looked at each other over this news this morning and burst out laughing.

We have a 401(k) plan for AmericanEnergy. It’s really generous, by design. We put in 17 percent of the employee’s salary into the plan. Not a match; if they put in just $1 in a year, we put in 17 percent. It’s a way for me to let them shield as much income as possible from the tax man. They can put in anything up to 7.5 percent, so they can sock away 24.5 percent of their salary every year. It adds up fast that way.

It’s not so generous to me; employers are subjected to a variety of tests to see if a 401(k)plan is “top heavy.” When I hired some people making “only” $35k a year in addition to my higher-paid engineers, we would have gone top heavy, so I reduced the contributions to my account to avoid that problem. I figure the government is going to steal it anyway [unless I can figure out a legal way to get it out of the country].

In the meantime I’ve invested nearly all of it in gold and silver since 2003. Those have done very, very well. Most of my other employees, while they know I am a gold bug, don’t follow suit. In fact, most of them just let the money sit in money market funds, even after I remind them that they get screwed that way. Well, it’s their money.

Today we learned we are top heavy. Not because I put too much in, but because my investments have done so well! My account is now judged to be “too large” a fraction of the total 401(k) portfolio. Because I invested wisely.

We don’t know what the penalty is, or if there is a penalty, or what we have to do. Once again we’ll have to pay a specialist to figure it out for us. When we called them, they knew about the provision, but had never encountered it in a plan before, so they have to do some research and get back to us.

It really is amazing. This country is not just creating roadblocks; it is finding new ways to punish success and thrift. Abigail and I had to laugh.

Tonight we’ll watch V for Vendetta to celebrate Guy Fawkes day. And drink. I picked the wrong decade to stop drinking.