Telecommuting Tax: Now the States Are Killing Jobs

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Telecommuting Tax: Now the States Are Killing Jobs

By Rich Tehrani, CEO, Technology Marketing Corporation  |  August 01, 2011


This article originally appeared in the August issue of INTERNET TELEPHONY

In August of last year I explained why there are so few jobs – in part the problem revolves around demonizing the successful by our politicians and in part because of excessive taxation. Part of the support for my post was an opinion piece from Michael Fleischer of Bogen Communications, a company in the telecom space I have followed for over a decade-and-a-half.

Some of you may think Fleischer is complaining too much and he needs to give back more of the money he earns to be fair. But you should know that in New Jersey he has to pay $74,000 so a worker can take home $44,000. He doesn’t mention this, but I will; if he then is lucky enough to make a profit he could pay 50 percent to more than 60 percent of that money back out to the government through federal and state tax as well as various fees for things like real estate taxes, regulatory compliance, etc.

Recently Fleischer was on Fox Business and isn’t any happier with the state of the U.S. economy. He has nothing but venom to spew at politicians who make it more difficult for his company to succeed. He calls this the second summer of “no recovery” – referring to what President Obama and Vice President Biden referred to last year as the “summer of recovery.” In fact, he is making no new marketing or sales investments until he has more clarity on the future.

Last September I asked the government to stop helping us, explaining how much damage it is doing to our economy through the words it uses and the actions it takes on a regular basis. As a single example I explained how a very well-intentioned bill with support from both parties to help more handicapped people become employed created a “protected class” which resulted in less handicapped people being employed. Time and time again, politicians make promises and subsequently get voted into office only to enact new policies and spend a fortune in the process to see the opposite result.

But if it wasn’t bad enough that the federal government was doing its best to put undue pressure on businesses at a time when many of them are barely staying afloat, the states have joined in. Specifically, cash-strapped states are going after companies that have telecommuting workers in their jurisdictions, explaining such companies are “doing business in their state” and subsequently must pay corporate tax. Barbara Haislip at The Wall Street Journal refers to this as a telecommuting tax.

One solution to the problem is to have the worker resign, form a corporation and then get paid by the company. But the company would now have to pay even more to make up for lost benefits such as health care, which would potentially cost much more without the ability to put the worker in a large corporate pool, not to mention the added red tape on behalf of everyone involved.

Even worse – and this is an issue rarely discussed – if Obamacare does go into effect it will have disastrous consequences on many businesses that have incredible health care plans but don’t have the resources to pay top dollar for employees. Many people work in the health care profession, for example, because they get great health care benefits included. Now the costs for hospitals and other companies in such a situation will go up, and they could subsequently be forced to shut down – meaning even less jobs.

Technology has unleashed massive amounts of productivity and as U.S. companies have to compete with those in India and China where there are far fewer regulations, taxes and lawsuits, the use of IP communications to enable things like telecommuting have allowed many companies to stay in business through the worst economy in many of our lifetimes. Now it seems the party is over and legal costs, fees and taxes from the states will potentially put the nail in the coffin for a number of businesses and, in turn, cost the U.S. economy even more jobs.

Rich Tehrani is CEO of TMC. In addition, he is the Chairman of the world’s best-attended communications conference, INTERNET TELEPHONY Conference & EXPO (ITEXPO (News - Alert)). He is also the author of his own communications and technology blog.

Edited by Stefania Viscusi