Big Balances: Out, Revenue Streams: In


For both reasons of security and taxation, big balances are seeming less and less attractive to Americans with both small and large sums to invest.


For capital seeking a safe place, there are almost no options left.  Why invest in the market, directly or indirectly only to see principals vanish and dividends suffer?    Also, why orient towards investments where even reduced income might be overtaxed in the current environment?


Why help service credit markets when the US government is going to elbow your customers aside to snorffle greedily at the small amount of credit left in the current market? 


Why invest in Treasuries when the yield is close to 0 (for awhile, it was 0!) and the prospective investor is left with the all-too-clear certainty that low yields will be more than offset by the declining value of repaid dollars as we devastate our currency with record-level deficits in the high $trillions?


Here at my company, we see from our dealings with the public a not-so-new strategy gathering new   steam: starting a small business and the resulting revenue stream.   Like a man whose only tool is a hammer and who sees every problem looking like a nail, I tend to look closely at online businesses because that is the market my employer services.  And the small successes there continue to be astounding… and they are growing.  So know that in the paragraphs that follow, I may focus some on online businesses, but even small businesspeople who own vending machines and have no use for a web site are finding ways to prosper. 


Government minds, especially the new ones, trying to formulate tax, revenue and spending policy seem to be locked firmly on the concept of taxpayer paychecks tied to government pay scales and union contracts.  They have very little experience with (and an appalling ignorance of) the options open to small business owners.   Most of them would flunk a simple, easy civics test that also included a couple of questions about free enterprise.  So it’s easy to understand that new government officials would have trouble nailing jelly to the wall, especially if that jelly does not want to be nailed! 


But before we get too smug about the problems the new government might incur trying to levy new taxes on us (compared with our maneuvers to avoid those taxes), lets recall that the government has figured out a way to tax the very air that we breathe (it’s called cap and trade) and may quickly recover from any early mistakes it makes in trying to enhance revenues.  Many high earners have already pointed out that $249,999 is more than $300,000 and are reducing their own paychecks accordingly as new tax policy ideas are being floated.  Others are wondering if the government might cast hungry eyes on our diminishing fund balances and try to adjust tax policy accordingly. 


Our point about the soon-to-come success in taxing the air that we breathe notwithstanding, it will probably be some time before the government casts its eyes forward on future revenues and tries to find a way to tax your new business’ revenues next month, next quarter, or next year… today. 


Just about everyone expects a new business to lose money in its first year or two (thus producing no tax exposure), but even a business that is losing money can still possibly pay the cell phone bill and the car payment and insurance in order to free up disposable income from the main household paychecks.  Even businesses that ‘threaten’ to make a profit can be managed by increasing advertising or development expenses to enhance future revenues at the expense of today’s declared profits.


Today’s free market heroes and patriots (and those who wish to preserve the small amount of diminished capital they have left after this year’s market savaging) are looking seriously at small business, especially online businesses as one of the few remaining investments that can assure future revenue streams – some which will last through retirement and be passed on in their estates without being aggressively taxed.