The foundation of our country’s success is opportunity. Opportunity is The American Dream. I am 35, and I have been blessed with the chance to pursue a more fulfilling life than my parents have had. My parents were blessed with a similar opportunity, as was each generation in this country before them.
For many young adults, one of the primary sources of opportunity they seek is economic opportunity. When asked the question, “Do you think you will be better off than your parents,” most people interpret the question to inquire about the status of material wealth. Once a person begins life independently of his/her parents, economic opportunity is a major focus. In other words, people dream of finding a way to get ahead financially; they dream of finding a way to improve lifestyle and financial security.
I believe that it is extraordinarily important that people, especially young people, perceive abundant economic opportunity. Currently, many people I know in their late-20’s through mid-40’s believe that their primary source of economic opportunity is through their homes and other real estate investments. Others are finding opportunity in small, primarily service-based businesses that they create.
Unfortunately, most people feel compelled that either they or a member of their family remain employed at a job with good healthcare benefits even if the job affects the time available with their family and does not contribute meaningfully to household economics.
There are many factors in the world today that encourage the growth of large businesses. As a student of history, I realize that factors have encouraged the growth of big businesses since the industrial revolution, if not before. Further, some businesses decline and others grow. Woolworth’s was a dominate consumer goods retailer that was surpassed by Sears that was challenged by K-Mart and was surpassed by Wal-Mart. In the 1960’s Sam Walton was eager to expand his mass-merchandizing retail business. He seized upon opportunity he saw, despite the dominance of Sears. Are eBay and Amazon the modern-day equivalents of Walton in the 60’s? I don’t know.
I also know that enormous opportunities existed on much smaller scales for restaurant franchisees, beverage distributorships, automobile dealerships, accounting partnerships, and countless other businesses. Are eBay Powersellers the new opportunities? Are the new opportunities comparable?
I know people in their 60’s and 70’s that retired from blue collar and white collar jobs and are financially secure. Many of these people had a one-person household income, worked at jobs that paid median wages, and saved. Today, they have paid off their house, have more than $100,000 in savings, social security checks, and Medicare. Many of them also have other real estate holdings that have appreciated more than they ever would have imagined. I know others that had higher paying jobs such as bankers, airline pilots, computer salesmen and lawyers that now are retired with a few million dollars in liquid wealth.
The same opportunity existed ten years ago and likely still exists today. In 1994, I got a job as a research assistant in Memphis, Tennessee, that paid $33,000 annually. I have worked hard and been lucky, but I am fortunate enough not to need to be an employee anymore.
We must retain economic opportunity for succeeding generations. If a generation believes that it does not have a shot at the American Dream, the results will be earth-shattering. As long as opportunity remains, I believe our country will continue to thrive as a Republic and be the greatest country that has ever existed.
In that spirit, I have some ideas to retain opportunity:
- Tax fairness of individuals versus businesses. Businesses have no limit on the interest expense that can be used to offset gross income for tax purposes. On the other hand, young, bright-eyed workers see more limits every day. If Toll Brothers owns a parcel of land in Loudon, it can finance the land and deduct the interest. If a young woman in Loudon works at Sprint/Nextel for a few years and cashes in some options for a down payment on a piece of land in Loudoun, she cannot deduct any interest beyond a paltry $3,000. Why does our government have a tax system that benefits big development companies over individuals in land purchases? Treating business and individuals comparable from a tax basis would open opportunities for individuals. At a minimum, it would allow individuals a level economic playing field to compete with businesses.
- Health care cost taxation. Using the prior example, the guys running Toll Brothers can deduct their health care insurance costs. If one of their employees left and wanted to compete in the land acquisition business, he would have to follow a myriad of complex rules to be able to deduct health care insurance costs. If, however, he either could not afford or did not want health insurance, he could only deduct his expenses to the extent that they exceeded 7% of his income if he earned more than $110,000 per year. In other words, the tax code is one of the reasons that some people are forced to stay in dead-end jobs in order to retain benefits.
- Tax Simplification. Most people that I know do not understand their tax returns. I believe that most people would be unable to complete their own personal returns accurately without the aid of a tax preparer or software program. To use an absurd example, when someone sells a house and the real estate commission to a business or individual exceeds $1,000, is the seller supposed to send a Form 1099 to the real estate agent? I have had tax professionals and lawyers look perplexed by the question and then answer, “Probably.” Here’s another one – are tenants that rent houses from individuals supposed to send the landlord 1099’s. It appears that the answer is “Yes,” although I have never received a 1099 from any tenant of mine. Tax simplification would make getting into business and compliance with the tax code much easier.
- Access to Capital. There are many fewer personal small business bankers today than there were a few years ago. Some individuals have great ideas, but do not have the ability to articulate the ideas sufficiently to attract capital. It would be beneficial to have resources available to help individuals figure out how to attract capital. I know that the SBA was a version of an attempt at this, but I believe more educational opportunities with fewer ties to governmental bureaucracy would help.
- Education. John Adams famously noted that an educated populace and a moral foundation were the two essential ingredients for the republic to succeed. Both are also great foundations to locate economic opportunity and succeed. Arithmetic and even algebra are almost essential skills to run an enterprise. Literacy is equally essential. I am just beginning to explore in detail the current offerings of our public education system, and I am not yet sufficiently informed to offer concrete suggestions.
I love opportunity.