I was at a business hearing yesterday sponsored by the North Country-Plattsburgh Chamber of Commerce and Unshackle Upstate. At this hearing, business owners were able to share their perspectives on challenges their businesses have been facing over the past year. Listening were State Senator Betty Little, Assemblywoman Janet Duprey and Meg Wood, representing Assemblywoman Teresa Sayward.
It was interesting that none of the businesses complained about "the economy" or the challenges of dealing with a recession. None of them asked their State representatives for bailouts to help them through these troubling times. Instead, every speaker talked about the new fees, taxes and regulations that the State imposed over the past year that are crippling their businesses.
Included in the list is:
- Requirement to renew the Certificate of Authority to collect sales tax (that for the first time, includes a fee)
- Increase in the LLC filing fees for companies that have achieved a certain gross sales figure
- Increase in tobacco license fees
- Increase in liquor license fees
- Increase in motor vehicle fees
One of the more compelling stories related to the changing of the Empire Zone tax credits. A few businesses that made huge capital investments into their business under an Empire Zone program that provided tax credits now have to reapply for those tax credits. One company present completed the application six months ago and they still have not received their credit refunds. These amount to tens of thousands dollars of operating capital owed to them. If you are just one month late in paying NY State Sales taxes, you will be assessed penalties and interest that can exceed 20% of the tax owed, yet the State can withhold monies owed to a small business for six months without any penalties and interest?
Most of the States operating revenue comes from the income and sales taxes generated by private enterprise. Small businesses owned and operated by NY State residents provide even more of an economic impact, as they cycle more of their profits into the State economy. Not only are these fees and regulations creating a burden on businesses, they are also providing an inequitable burden on small businesses.
According to an SBA study in 2005, the average regulatory cost per employee of a firm of less than 20 employees is $7,647. The average regulatory cost for a firm of greater than 20 employees is $5,411. No doubt the amount of time small business owners have in completing new Certificates of Authority, Empire Zone re-certifications and the costs of new fees is going to a much more significant impact on small businesses than the larger businesses.
For example, the license to sell tobacco was increased from $100 to $1,000 this year for small retailers generating revenues under $1,000,000 in annual revenues (note, this is combined revenues, not just tobacco sales). Those businesses that do up to $10,000,000 in gross revenues pay $2,500. Let's do a little math.
I have a convenience store that does $500,000 in gross sales. I sell about $50,000 of cigarettes per year. My gross profit on cigarettes is about 15%, so I clear about $7,500. My cost of licensing is 13% of my gross profit.
A few blocks away is a supermarket(which happens to be owned by a company in Maine). They do $5,000,000 in gross revenues and sell $500,000 in cigarettes. They clear $75,000 on cigarette sales. Their license fees are 3% of their gross profit.
I decide it is not worth my while to sell cigarettes anymore for $1,000/year. In a perfect world, we would assume all my cigarette customers would kick this habit. The reality is that most are just going to the supermarket to buy cigarettes and that profit is going to leak to that larger, out-of-state competitor. The significant amount of that $7,500 that would have cycled into the NY State economy with my spending most of my income in NY will now go to Maine.
Most of these fee increases will most likely have an economic impact of unintended consequences to the State, but that is often the case when government increases fees and taxes. There are only so many slices of pie in a particular pan, if you keep going after a bigger slice, eventually there will be no pie left. The fact that quite a few of our pie pans are smaller in these difficult economic times compounds the problem.
Quite a few of the speakers at the hearing noted that "we are preaching to the choir," as all of the government officials were opposed to the budget that proposed all these fee increases. Needless to say, we have to get our choir to sing louder.
This is not an endorsement or critique of any particular government official. When it comes to developing a State budget that makes sense, it should not be a party line issue. We need all government officials to think of the consequences of their actions. The livelihood of some small businesses are at stake here and that is an issue that every legislature should take seriously. Certainly this small business counselor takes these issues seriously, as I am often working with the business owner that is deciding whether this new fee or paperwork requirements are the proverbial straws that will break the camel's back. There are some businesses that are struggling to survive and these fees and to many, the State isn't putting straws, but rather shoveling lead weights on their backs.
In his introduction, Garry Douglas, Executive Director of the Plattsburgh-North Country Chamber of Commerce talked about the core principle of the Hippocratic Oath, which is "Do no harm." He pointed out that if our government officials were doctors and the business owners were patients, "boy, would there be a malpractice suit."
At some point, we need our leaders to develop a proactive strategy to make it easier for more small businesses to succeed in New York State. There are ways to do no harm and facilitate a more business friendly environment; the choir just has to sing a little louder and it would help if we could get more of our government officials to join us in singing the same tune when it comes to the principles that foster business development.
Thursday, September 24, 2009
Tuesday, September 22, 2009
Health Care Paradigm
The buzz in the world of politics is health care reform. Different proposals have been shared, proposed legislation has been presented and “town hall” meetings have shown we can’t agree on a solution. Not only can we not find a form of compromise, but we also can’t disagree with some semblance of civility.
The emotions on this issue are so powerful and our nation is so polarized when it comes to finding a solution to this health care mess. Unfortunately, no solution will come to pass until there is some common ground found among our lawmakers. Yet instead of working together to find a solution, our lawmakers are drawing lines in the sand and using rhetoric to attack the flaws of others, completely ignoring the flaws with their own proposals.
I’ve used this Albert Einstein quote before and I will keep using it: “The problems we face today cannot be solved by the minds that created them.” Aside from the dysfunctional working relationship of our lawmakers, the major problem with our current system is that health care does not lend itself to insurance. Yet no one is addressing this issue. Our nation has created a for-profit, behemoth of a health insurance industry and all of the proposals currently on the table refuse to recognize that this needs to change.
Health care is something that every individual needs in some form or another. Of course, some need health care more than others, but the basic fact is that if we want to live, we need to care for our health.
Insurance is an industry that is based on managing risk. You get insurance to protect you from an unlikely event. The way the industry stays profitable is by assessing premiums based on the amount of claims and the cost of the payout. Premiums are established by analyzing that, and of course, including some margin for administration and profits. Obviously, if too many claims are made, the cost of insurance goes up. Sometimes the cost goes up to a level where there is really no value in purchasing a policy. At this point, consumers will usually see no benefit in that insurance and just come up with a better way to manage their risk.
Think of it this way. We need to eat every day. Should we buy food insurance to ensure that there is food on the table tomorrow? Imagine what that would do to the costs of groceries if most of us decided that we need to purchase insurance to have food on the table and then filed claims to purchase our groceries every week. Then compound that by the fact that some people in this pool of grocery shoppers need to eat significantly more than others or have special diets that require very exotic and expensive foods. Before long, we are paying significantly more for our groceries than what they are worth, because we are supporting both a for-profit insurance industry and a group of people who spend more on food than we do. This is pretty much what has happened to the health care industry.
Not only are most of us paying insurance premiums on something that most of use on a regular basis, we are also faced with the dilemma that some health care users are going to have expensive health care needs, some of which for conditions that will require some level of ongoing care. These needs for health care services tend to be exponentially higher than what an average user would spend for health care. Yet these costs need to be spread in the pool of users for health insurance companies to remain profitable.
According to the 2009 Milliman Medical Index, the average family of four spends over $16,000 for direct health care services. Yet the problem with averages is that a few exponential highs can really skew an average cost. If you think about what a typical family needs in a given year, $16,000 is a pretty high figure. What would it cost for 4 checkups and maybe four typical childhood incidents in year, such as a sprained ankle or sore throat that requires a doctor visit and some prescription medication?
It is hard to quantify what is an average health care cost for a healthy family, but it would obviously not be near $16,000/year. According the Henry J. Kaiser Foundation publication, Trends in Health Care Spending:
While discussions about the costs of health care often focus on the average amount spent per person, spending on health services is actually quite skewed. About ten percent of people account for 63% of spending on health services; 21% of health spending is for only 1% of the population.
Each person who buys healthcare is paying for not only their care, but also the care of others. Using my food example, why should I pay for grocery insurance so others can have truffles and Dom Perignon when I am only eating Cheerios and milk? Well, when it comes to health care, those who get the truffles and Dom Perignon often aren’t choosing such an expensive service. I dare say that most would rather not need such levels of treatment. Should I begrudge paying for someone who needs dialysis, an organ transplant or acute cancer treatments for a chance to survive?
We all need health care; so much so, that if we have a health care need, we will seek those services without much regard to costs. Yet the health care industry consists of businesses that have competing needs. They need profit, and to maintain profitability, they need to control their expenses. This creates a dichotomy where the insured wants health care at all costs and your insurer wants to limit payment of claims at all costs. This does not lend itself to a positive consumer/service provider relationship.
In this health care debate, we are talking about all the costs, but are we really addressing the core issue? Yes, finances need to be considered in any debate that discusses the use of public funds, but how do you quantify the value of pain relief, comfort or survival? At what point do we say that a life is not worth the cost?
Unfortunately this brings us to a huge philosophical question. Should health care be an individual responsibility or societal responsibility? It's a tough question that goes beyond black and white and their are infinite shades of gray. "Socialism" is a dirty word being thrown around in this debate, but we use our taxes for national defense, why not for national health? I am not yet sold on the so called "public option," but at the same point, I find the "socialism" rhetoric to be very counterproductive towards us coming to some form of improvement on health care.
No doubt, coming up with a solution that makes sense is going to be tough. I personally do not mind paying into a pool to ensure those who are in need have access to health care, but I obviously have limits into what I can pay. I will add that I have a serious problem being mandated to pay into an industry that gains profit by avoiding the provision of services that may be in the best interests of someone’s health.
The challenges we face with health care are significant. Somehow we have to change our level of thinking to solve this problem we created. Who will take the first step?
The emotions on this issue are so powerful and our nation is so polarized when it comes to finding a solution to this health care mess. Unfortunately, no solution will come to pass until there is some common ground found among our lawmakers. Yet instead of working together to find a solution, our lawmakers are drawing lines in the sand and using rhetoric to attack the flaws of others, completely ignoring the flaws with their own proposals.
I’ve used this Albert Einstein quote before and I will keep using it: “The problems we face today cannot be solved by the minds that created them.” Aside from the dysfunctional working relationship of our lawmakers, the major problem with our current system is that health care does not lend itself to insurance. Yet no one is addressing this issue. Our nation has created a for-profit, behemoth of a health insurance industry and all of the proposals currently on the table refuse to recognize that this needs to change.
Health care is something that every individual needs in some form or another. Of course, some need health care more than others, but the basic fact is that if we want to live, we need to care for our health.
Insurance is an industry that is based on managing risk. You get insurance to protect you from an unlikely event. The way the industry stays profitable is by assessing premiums based on the amount of claims and the cost of the payout. Premiums are established by analyzing that, and of course, including some margin for administration and profits. Obviously, if too many claims are made, the cost of insurance goes up. Sometimes the cost goes up to a level where there is really no value in purchasing a policy. At this point, consumers will usually see no benefit in that insurance and just come up with a better way to manage their risk.
Think of it this way. We need to eat every day. Should we buy food insurance to ensure that there is food on the table tomorrow? Imagine what that would do to the costs of groceries if most of us decided that we need to purchase insurance to have food on the table and then filed claims to purchase our groceries every week. Then compound that by the fact that some people in this pool of grocery shoppers need to eat significantly more than others or have special diets that require very exotic and expensive foods. Before long, we are paying significantly more for our groceries than what they are worth, because we are supporting both a for-profit insurance industry and a group of people who spend more on food than we do. This is pretty much what has happened to the health care industry.
Not only are most of us paying insurance premiums on something that most of use on a regular basis, we are also faced with the dilemma that some health care users are going to have expensive health care needs, some of which for conditions that will require some level of ongoing care. These needs for health care services tend to be exponentially higher than what an average user would spend for health care. Yet these costs need to be spread in the pool of users for health insurance companies to remain profitable.
According to the 2009 Milliman Medical Index, the average family of four spends over $16,000 for direct health care services. Yet the problem with averages is that a few exponential highs can really skew an average cost. If you think about what a typical family needs in a given year, $16,000 is a pretty high figure. What would it cost for 4 checkups and maybe four typical childhood incidents in year, such as a sprained ankle or sore throat that requires a doctor visit and some prescription medication?
It is hard to quantify what is an average health care cost for a healthy family, but it would obviously not be near $16,000/year. According the Henry J. Kaiser Foundation publication, Trends in Health Care Spending:
While discussions about the costs of health care often focus on the average amount spent per person, spending on health services is actually quite skewed. About ten percent of people account for 63% of spending on health services; 21% of health spending is for only 1% of the population.
Each person who buys healthcare is paying for not only their care, but also the care of others. Using my food example, why should I pay for grocery insurance so others can have truffles and Dom Perignon when I am only eating Cheerios and milk? Well, when it comes to health care, those who get the truffles and Dom Perignon often aren’t choosing such an expensive service. I dare say that most would rather not need such levels of treatment. Should I begrudge paying for someone who needs dialysis, an organ transplant or acute cancer treatments for a chance to survive?
We all need health care; so much so, that if we have a health care need, we will seek those services without much regard to costs. Yet the health care industry consists of businesses that have competing needs. They need profit, and to maintain profitability, they need to control their expenses. This creates a dichotomy where the insured wants health care at all costs and your insurer wants to limit payment of claims at all costs. This does not lend itself to a positive consumer/service provider relationship.
In this health care debate, we are talking about all the costs, but are we really addressing the core issue? Yes, finances need to be considered in any debate that discusses the use of public funds, but how do you quantify the value of pain relief, comfort or survival? At what point do we say that a life is not worth the cost?
Unfortunately this brings us to a huge philosophical question. Should health care be an individual responsibility or societal responsibility? It's a tough question that goes beyond black and white and their are infinite shades of gray. "Socialism" is a dirty word being thrown around in this debate, but we use our taxes for national defense, why not for national health? I am not yet sold on the so called "public option," but at the same point, I find the "socialism" rhetoric to be very counterproductive towards us coming to some form of improvement on health care.
No doubt, coming up with a solution that makes sense is going to be tough. I personally do not mind paying into a pool to ensure those who are in need have access to health care, but I obviously have limits into what I can pay. I will add that I have a serious problem being mandated to pay into an industry that gains profit by avoiding the provision of services that may be in the best interests of someone’s health.
The challenges we face with health care are significant. Somehow we have to change our level of thinking to solve this problem we created. Who will take the first step?
Friday, September 11, 2009
In Memory
As you read the news today, there is no escaping the significance of this day. Like many monumental days in history, we tend to reflect and remember where we were on that particular day of infamy.
I was living in Wasilla, Alaska at the time and it was one of those days when I felt being that far away from my family and friends in NJ and Pennsylvania was particularly difficult. I was also scheduled to have my very first surgery in two days and the thought of going under general anesthesia, something that was creating huge anxiety for me the days leading up to September 11th, now seemed to be an insignificant concern.
I remember watching the television over the next few days and hearing the individual stories of some of the beautiful people whose lives prematurely ended on that day. I couldn't help but think of the pain and grief the families of the those who lost their lives. I couldn't help but to feel guilty for worrying about something so mundane on a day when others had to deal with such a major tragedy.
Over the next few days I received the phone calls from family and friends and learned how some people I had known were included among those who passed on that day. Too many people perished and we do live in a small world; it is hard to think of anyone who was not touched in some manner by this tragedy.
Like many Americans, I still feel anger that a few uncaring individuals were willing to senselessly murder so many good souls on this day. I still cringe how people throw out the term “nine eleven” as a buzz word or remember this as a day of terrorism. It was a tragic day, but there was no terror, because I will never cower to a misguided ideology that justifies senseless murder. I didn't on September 11, 2001 and I still feel no terror today. I hope most other Americans share that sentiment.
Still, today is a significant day because we should remember the beautiful people who passed away on September 11, 2001. There will be many opportunities for remembrance and below is a link to one special location that I am aware of:
Garden of Reflection
I write this blog post in memory of Vic Saracini. He was a person who I did not know very well, but Vic Saracini would visit my bagel store on occasion and share some kind conversation with us.
He was a man who I know deeply cherished his family. He happened to share a story with me about the feeling of returning to his daughters after a trip. The smile on his face as he talked about his family told me more than the words he said.
We all have different memories and emotions about this day. I only hope you take the time in your thoughts to think of the wonderful people like Vic Saracini. They will be dearly missed.
I was living in Wasilla, Alaska at the time and it was one of those days when I felt being that far away from my family and friends in NJ and Pennsylvania was particularly difficult. I was also scheduled to have my very first surgery in two days and the thought of going under general anesthesia, something that was creating huge anxiety for me the days leading up to September 11th, now seemed to be an insignificant concern.
I remember watching the television over the next few days and hearing the individual stories of some of the beautiful people whose lives prematurely ended on that day. I couldn't help but think of the pain and grief the families of the those who lost their lives. I couldn't help but to feel guilty for worrying about something so mundane on a day when others had to deal with such a major tragedy.
Over the next few days I received the phone calls from family and friends and learned how some people I had known were included among those who passed on that day. Too many people perished and we do live in a small world; it is hard to think of anyone who was not touched in some manner by this tragedy.
Like many Americans, I still feel anger that a few uncaring individuals were willing to senselessly murder so many good souls on this day. I still cringe how people throw out the term “nine eleven” as a buzz word or remember this as a day of terrorism. It was a tragic day, but there was no terror, because I will never cower to a misguided ideology that justifies senseless murder. I didn't on September 11, 2001 and I still feel no terror today. I hope most other Americans share that sentiment.
Still, today is a significant day because we should remember the beautiful people who passed away on September 11, 2001. There will be many opportunities for remembrance and below is a link to one special location that I am aware of:
Garden of Reflection
I write this blog post in memory of Vic Saracini. He was a person who I did not know very well, but Vic Saracini would visit my bagel store on occasion and share some kind conversation with us.
He was a man who I know deeply cherished his family. He happened to share a story with me about the feeling of returning to his daughters after a trip. The smile on his face as he talked about his family told me more than the words he said.
We all have different memories and emotions about this day. I only hope you take the time in your thoughts to think of the wonderful people like Vic Saracini. They will be dearly missed.
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