There are over 23 million self-employed Americans. They account for nearly 3/4 of American businesses, with over a trillion dollars in receipts. The labors of the self-employed are as old as agriculture, and as new as computer programming. The self-employed cut across political party, age, sex, education, religion, creed and geography. They are the backbone of rural and many local urban economies. Because of the Self-Employment Tax, they are acutely aware of their identity as “self-employed,” but not of their large numbers and diversity in the United States. The self-employed are also the fastest growing and largest untapped voting block in the country. Their influence can easily swing future Congressional and Presidential elections.

HEALTH INSURANCE | SBA LOANS | SELF-EMPLOYMENT TAX | THE IRS | ANTITRUST ENFORCEMENT | REGULATIONS

In 2000, for the first time since well before passage of the National Labor Relations Act, nonfarm sole proprietorships outnumbered union membership. From 1980 to 2000 nonfarm sole proprietorships doubled from 8,892,000 to 17,905,000, while union membership declined about 1.5 million to 16,258,000. By 2006, union membership had declined to 15,390,000, while the number of self-employed had increased by 3.5 million to over 23,000,000 (including farmers). This hugely important change in the demographics of the American workplace must be recognized and acted upon by the Democratic Party, if it is to build its majority in Congress and take back the Presidency.

In a republic, identity creates power. Consequently, the most important step in getting the self-employed to exercise their political clout, and thereby to defend themselves and their country, is to give the self-employed the welcome news that there are over 23 million of them, and to recognize the self-employed by name and need.

Unfortunately, the Democratic Party, like the Republican Party, has little recent history of supporting legislation that would help the self-employed. Federal, state and local governments have made the self-employed the highest taxed, most regulatory burdened, least protected citizens. Consequently, the majority of the self-employed are voting Republican in the hope that government will leave them alone. The self-employed are the backbone of rural America, and any change in the political direction of rural America will come about only when Democrats recognize and promote the importance of the self-employed to the rural economy and its quality of life.

Politicians indirectly refer to the self-employed as “small business,” but the term “small business” is code to the self-employed for being ignored. The Small Business Administration gives the self-employed less than 1/10th of 1% of SBA loans, and the SBA defines a “small business” in manufacturing as a firm with less than 500 employees.

George Bush uses the term “small business” often because he has calculated that using this term will win Republicans votes; his economic policies, however, have not helped the self-employed. Democrats can turn the Republican Party’s small business calculation to their own advantage by reaching out to the 23 million self-employed Americans by name and recognizing their issues.

If the Democratic Party wants to reach the self-employed, they must first use the name of this producer group: “self-employed.” If proposed economic plans do not refer exclusively to the self-employed, but include other small businesses, then Democrats should use this phrase: “small business and the self-employed.”

Health Insurance Unlike corporations, the self-employed are not allowed to take their health insurance premiums as a business deduction, although they are allowed to use the cost of health insurance premiums as an Income Tax deduction. The difference between these deductions is that the self-employed pay the 15.3% Self-Employment Tax on the income that pays for their health insurance premiums, while corporations (and their insured employees) pay no Social Security Tax on the income that pays for their health insurance premiums. The unincorporated businesses of the self-employed deserve the same deduction for health insurance as incorporated businesses. Allowing a self-employed business to deduct a health insurance premium of $10,000 as a business expense would save that self-employed business about $1,500 on its Self-Employment Tax. This creates equity by allowing the self-employed the same pre-tax benefit as corporations. This represents a very basic economic and social justice value that self-employed and unincorporated business owners are keenly aware of and will immediately respond to.

At least 30% of the self-employed have no health insurance. This is primarily because the current market approach to the purchase of health insurance reflects a market economy in which the economies of scale reward large buyers. Consequently, health insurance rates for the self-employed are much higher than for any other producer group, and are often unaffordable. If the United States does not adopt a single payer universal healthcare system, the federal government must at least step in to broker health insurance rates that reflect the twenty-three million self-employed producers in the United States.

Another approach would allow the self-employed to buy into any of the health insurance plans offered by the federal government to its employees, as well as offering a tax credit to offset the costs of this health insurance. Because most self-employed people pay far more Self-Employment Tax than they do Income Tax, a tax credit to offset health insurance costs would effectively address the crisis of health insurance for the self-employed, if this tax credit could be applied to the Self-Employment Tax. Applying a health insurance tax credit to the Self-Employment Tax would succeed in mobilizing self-employed voters; addressing both the crisis of health insurance, and the inequity of the Self-Employment Tax.

Small Business Administration Loans Less than 1/10th of 1% of Small Business Administration loans go to the self-employed. The Small Business Administration loan program must be made to reflect the fact that nearly 3/4 of businesses in the United States are self-employed. One option is for the SBA to greatly expand its micro loan program.

Cut the Self-Employment Tax in Half. The self-employed are the highest taxed, most regulatory burdened, least protected Americans. Between 1950 and 1990, the Self-Employment Tax rate increased 1,000%.

When the Truman Administration extended compulsory coverage of Social Security to the self-employed in 1950, the self-employed paid only the employer’s share of the Social Security Tax; then equal to a flat tax of 1.5% on all earned income below $3,600. Today, the self-employed pay both the employer and employee shares of the Social Security Tax, at a combined rate of 12.40%. Together with the contribution to Medicare, the self-employed pay in 2008 a flat tax of 15.3% on all earned income below $102,000—there are no deductions. This is called the Self-Employment Tax. Consequently, a self-employed family making $35,000 has as their first expense a Self-Employment Tax of about $5,000.

The Self-Employment Tax should equal only the the employer’s share of the Social Security and Medicare contributions—7.65%. With this savings the self-employed would have a better chance to invest in themselves and their businesses, as well as pay for health insurance. They would also be better able to compensate themselves for protections taken for granted in corporations and government, but lacking in their own producer group, i.e., minimum wage, workers compensation, and unemployment insurance. Cutting the Self-Employment Tax in half would initially cost the Social Security Trust Fund (currently $1.7 trillion) about twenty billion dollars a year, but would also be a powerful economic stimulus, particularly in rural areas.

Ninety percent of farmers are self-employed; to save the family farm, the self-employed must be saved.

IRS Targets the Self-Employed. On January 14, 2004, the IRS’s National Taxpayer Advocate, Nina Olson, attributed a large part of the federal deficit to self-employed tax cheats. She recommended that Congress enact a withholding requirement that would require a business which contracted with a self-employed person for over $600 to withhold part of the payment for the IRS. (No money would be withheld if the contractor was incorporated.)

If this proposal were to become law, it would be great for accountants, but terrible for the self-employed.

There are many reasons why self-employed businesses choose not to incorporate. If this recommendation were enacted, it would force numerous self-employed businesses to incorporate in order to shield themselves and their accounts from the burden of this withholding. It is one more step in the corporatization of the United States; people must define themselves as corporations in order to do business.

Since 2004, the IRS has continued to blame the self-employed for a large measure of the federal deficit. Tax audits of the self-employed have increased, while the IRS has also proposed requiring credit card companies to report to the IRS payments to the self-employed and other small businesses, as well requiring on-line auction sites to report sales to the IRS.

Antitrust Enforcement In the last decade, self-employed producers have banded together to collectively challenge the small number of corporate purchasers that dominate their respective industries (doctors in private practice versus HMOs, independent truckers versus shippers, farmers versus processors). In a profound perversion of antitrust law, corporations and government have responded to these challenges by applying antitrust laws to these self-employed groups; their common demands are punished by the law as price fixing. The practice of enforcing antitrust law in order to maintain corporate dominance of the self-employed must end; the future of family farms and physicians with a family practice is at stake.

Regulations Innovation has been the hallmark of America’s economic engine. Dating back to Benjamin Franklin, the notion of the common man doing uncommon things and being rewarded for it is well established in our culture. Regulations for product safety and product effectiveness, however, can be devastating to the self-employed because these regulation are often too expensive or too time consuming for the self-employed to comply with. Representatives of corporations, rather than consumers or small producers, often set “government” standards. Consequently, innovation is stifled because the relative cost in time and money for most regulatory compliance is much higher for the self-employed than for large corporate enterprises. These regulations regularly drive small producers out of business, or keep producers from entering the market at all. Product safety scares are often used as an excuse and means to drive small competitors out of business through the creation of costly regulations which only large corporations can afford, even if injuries occur only through the practices of these same large corporations.

Regulatory burdens for the self-employed include, but are not limited to, mandates for processing, handling, equipment, paper trails, inspection, testing, licensing and insurance. When the self-employed and small producers go out of business because they can’t afford to comply with regulations, rather than because they offer a useless product or are a proven danger, neither the consumer nor the economy is served. Barriers to market entry are always barriers to innovation, and usually to service.

It is a nearly iron law of modern democracy that when a regulator is created, a target of influence is created, and when a target of influence is created, those in the best position to influence will throw their efforts upon that target. The self-employed and small producers are usually unorganized, and seldom have the time or resources to influence regulatory outcomes. They must abide by the law, but seldom make it.

Under the law, self-employed producers are liable for damages their products or services may cause. Corporations are liable for damages as well, but, as legal entities, it is corporations and not executives of corporations that are usually held responsible. To escape personal liability is in fact one of the primary reasons businesses incorporate.

When regulations for safety and effectiveness are written, distinctions in accountability of the self-employed producer and corporations should be taken into account. Regulations that would be too costly or burdensome for the self-employed producer should not be applied to this sector of the economy when the judgment of the consumer and the integrity of the self-employed producer are society’s own best protection.

The right to be one’s own boss is as fundamental to American freedom as the right to privacy or free speech. In a rural community, the self-employed may include a carpenter, farmer, lawyer, accountant, plumber, electrician, barber, fisherman, musician, masseuse, chiropractor, real estate agent, house painter, trucker, logger, excavator, stonecutter, artist, computer programmer, shopkeeper, photographer, herbalist, welder, mechanic or writer. The diverse lives and services of the self-employed need to be promoted and protected; if the Democratic Party chooses to be an advocate for the self-employed, it will gain a large majority in the Congress and take back the Presidency.

Had a number of voters equal to 5% of the self-employed in Iowa, New Hampshire, New Mexico, and Wisconsin switched Presidential candidates, the outcome in those states would have been reversed.

Had a number of voters equal to 10% of the self-employed in Minnesota, Ohio, Nevada and Pennsylvania switched Presidential candidates, the outcome in those states would have been reversed.

Had a number of voters equal to 15% of the self-employed in Michigan and Oregon switched Presidential candidates, the outcome in those states would have been reversed.

Had a number of voters equal to 20% of the self-employed in Florida and Colorado switched Presidential candidates, the outcome in those states would have been reversed.

Had a number of voters equal to 25% of the self-employed in Arkansas and Missouri switched Presidential candidates, the outcome in those states would have been reversed.

(Bryan lost to William McKinley not because of the weakness of this message, but because he was outspent 10 to 1.)

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