Taxmaggedon – a dismal prospect
Recent summer celebrations focused on the joys of warm weather, but a wintery shadow is being cast on today’s warm weather fun by the prospect of Taxmageddon’s arrival in less than six months.
Current plans for tax hikes and spending cuts will have us celebrating the New Year by planning how to pay the average $3,701 tax increase that will face four out of five U.S. households.
The federal government, however, will not be experiencing the resulting collection of an additional $399 billion as a surplus. As distasteful as the looming increases in taxes and decreases in services are, our current fiscal trajectory is leading to a public debt of 200 percent of GDP by 2037.
That said, the Congressional Budget Office estimates that Tamageddon is likely to clip 4 percent from next year’s economic growth. Without this hit, growth was predicted at 2.7% so the result will be 1.3% contraction, plunging the nation back into recession. If the 2.7% growth prediction was optimistic, it will be worse. If Europe cannot get its act together and Greece/Spain/Italy end up defaulting on their debt, the result will be much, much worse.
While exactly what flavor and dose of medicine we will have to swallow next year depends largely on who wins the White House this fall, personal and business planning is now more valuable than ever. Some common sense precautions are to:
Reduce long term obligations. For example, structure employment contracts on an at-will basis where possible so that they can be terminated if there is not sufficient work available.
Eliminate or reduce debt, especially loans that may be called in at will by panicked bankers or subject to rate hikes.
Structure your business to be flexible. As Charles Darwin said “It’s not the strongest, nor the most intelligent who survive, but the most adaptable”. How long does it take you to change business processes such as your CRM system, to reflect changing market conditions or support a new product? How long does it take to execute on an initiative such as exposing your new products or upgrades to customers who contact the helpdesk? For companies that use an adaptive infrastructure, the answer is measured in days. For others, it may take so long they are always out of step with requirements.
Reduce costs. Automation such as dynamic FAQ’s at your website and a 24/7 web based customer support portal can allow your customers to resolve their problems at any time of the day or night, at almost no cost to your business.
Reduce risk. If you engage a vendor on a significant project, protect yourself against cost overruns and make sure that they are shouldering some or all of the risks.
Keep your head up. Recessions provide great opportunities for recruiting high quality employees, grabbing customers from overstretched competitors that are sliding into bankruptcy and wringing concessions from vendors. If you have structured your business to be an oasis of stability in a sea of chaos, these are wonderful growth opportunities.
The post Planning for Taxmageddon appeared first on Agiloft.