Letter to the editor

You write of Bechtel (‘Small’ business loosely defined for tax purposes, Oct. 1) with $30.8 billion revenue in 2009, but you don’t mention that Bechtel had 44,000 employees working on projects in nearly 50 countries during that same fiscal year. As you should know, “revenue” is not profit.

Bechtel also filed corporate income tax returns in accordance with current IRS rules and regulations.

As you point out, Bechtel is a private company organized under S Corporation rules. One of the requirements of organizing an S Corporation is there can be no more than 100 shareholders. (Also defined as “owners.”)

Another requirement is that taxes have to be paid by the shareholders on all company profit, even profit held in abeyance and not paid out to the shareholder.

This is where the “rubber meets the road,” so to speak. As an example, two people set up a business as an S Corporation and each owns 50% of the company.

After a start-up period of two years the company is doing well and they decide the company can pay each of them a salary of $50,000 gross. The third year the company has an exceptional year and after all expenses are deducted, including salaries, shows a $400,000 profit. Each of the owners is required to pay income taxes on one half of the profit, or $200,000, in addition to his regular salary. For this year, each owner now has an income of $250,000. This, even if they do the prudent thing and have the company deposit the $400,000 in a CD for unanticipated  expenses, or possibly expansion, in the coming years. This is how the proposed tax increase can affect the small business owner making less than $250,000.

This is the “scary talk” warning about Obama’s taxes hurting small businesses coming from Republicans. Small business owners probably understand it very well.

My wife and I owned a company for 25 years that was organized as a C corporation. We were the company and the company was us. One thing we did, as representatives of our company, was to not allow any display of personal animosity or political bias to be displayed toward any of our clients. We were operating a “small business” and needed every customer we could get.

I’ve never owned a newspaper and never will. But if I did I would want my paper to appeal to the largest number of possible readers and that appeal would hopefully translate into subscriptions plus advertising revenue from businesses, both small and large. Statistics seem to show that the percentage of persons that align “liberal” is somewhat less than 50%.

So even though the “Editorial” is rightfully your page, using it in a way that very well may be causing over half of your subscribers to wad it up and discard it in anger and disgust and swear they will not renew their subscription doesn’t seem like a very good business plan.

If I were editor I might want to present a “fair and balanced” objective editorial column. Particularly if I were wading into political waters. If I were editor I might have done a little research and come up with an editorial explaining to my readers just why Republicans are claiming Obama’s taxes could hurt small businesses, rather than just repeating the tired old Democrat line that Republicans are “just protecting big business interests.”

Just a thought.

Wendell Carvan

Oakland

(Editor’s note: The business owner in Carvan’s example would be unaffected by the legislation now in limbo which proposes a tax increase on family income over $250,000.)