What if there were a way of jump-starting the U.S. economy that did not depend on government borrowing, on government spending, or reducing taxes? A method that harkens back to the way this country was started and grown; by entrepreneurial spirit, hard work, and personal responsibility. With corporate money sitting on the sidelines due to the unease of federal regulatory dynamics, this new growth of the economy lays at the feet of the individual.
With the net worth of all citizens of the U.S. reduced by trillions of dollars in the last three years, you ask how that can be possible. My answer lies in 401 and IRA plans.
Allow individuals the ability to use 25% of their own retirement money, up to $100,000, to start a new business (LLC, S Corp or Corp.), without tax or penalty obligations on the withdrawal of retirement savings. This is not a loan that has to be paid back into the retirement plan, but a flat out distribution.
What's the worst that can happen? 1) The individual blows it all on a company car, wages, advertisement, etc., and he is 25% in the hole with his retirement plan? 2) We've taken billions of dollars out of the stock market? Trillions of dollars will come back into play as the economy revs back up. 3) Loss of potential tax money in retirement of the individual's income? Retirement savings, taxed in the future, will be taxed very little, if anything at all. Also, think of the corporate taxes that will be generated over lifetime of the company, let alone the capital gains tax if the company is sold or taxed as inheritance.
How about the pros? 1) the economy jump starts; raising all boats with the new influx of cash, 2) these new companies hire new employees, taking people off the unemployment roles and adding them back into the income tax base, 3) The successful new investors have a better retirement plan with the capital of the business they've started up.
There are thousands of talented people out there, both employed and unemployed, that just need a boost like this to start their company. To make the program even more enticing, eliminate the corporate tax on the start up for the first 5 years (most start-ups don't make money the first few years in the first place).
Currently, there are trillions of dollars in 401k and IRA plans. Many have taken a hit in the last few years, and investors are upset that their 401k is now a 201k, however they can pull us out of this economic malaise. Sure, some companies will go belly up soon. Some will last for only a few years, but others will last a lifetime and beyond. Just imagine there are potential Steve Jobs or Bill Gates out there, and all they need is a little capital. Are we going to wait around for the Federal Government to "try and do something" or are we going to allow the individual entrepreneur to take the bull by the horns and wrestle this economy back again? What have we got to lose?
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