Sounds about right. Alaska, thankfully, is actually generally pretty friendly to small business. Some of the smaller towns have sales taxes and such that are a pain to collect but it generally is ok. Heather did some self-employment in Anchorage and it was easy enough -- the federal taxes are a pain to file but it isn't awful.
We looked at some small business/self employment side job type gigs in our new location and it is awful. I worked it out and to run a small side gig that is NOT on the more highly regulated/restricted professions list and which doesn't include heath service inspections (like for food prep), it would still take about a full work week (40 hours plus) of time to comply with various regulations. It would also cost a few hundred bucks up front each year for fees. Then, you'd have to pay taxes including income, property, and use taxes.
Frankly, for a small business that has zero employees and which grosses less than $5K per year, the hassle is just not worth it. The financial expenses and taxes cut the gross take by over a quarter--and that is only because I am very careful about tracking deductible expenses to reduce the federal tax burden. The time burden is significant too; if you value your time at $10/hour then 40 hours to deal with local bull$&*# plus the 20+ hours spent annually on federal tax compliance wipes out any remaining profit.
I can't imagine running, say, a midsize business. I'm thinking of the sort of business which is essential for your family's well being but not so big that you can hire a large staff. Something like an independent contractor who maybe has one or two part time employees and grosses $20K-40K per year. That's not enough to hire a good tax pro or accountant, but it is enough to get hammered by a ton of regulatory requirements. As soon as you hire your first employee the time investment to comply with all the federal, state, and local requirements vastly increases.
I am forced to conclude that the vast majority of small business owners do not bother to comply with this regulatory burden and simply evade taxes. It is simply not viable to run a business and comply with the costs of compliance. I fear that as states and localities run out of money they will squeeze self-employed folks.
We have been fortunate in that I've had steady employment, and we're and conservative in our spending and thus don't need the money; these days we just generally volunteer or do things as hobbies instead of for side cash, but if we were really strapped I'd be even more peeved. Many people don't have the choice to pass up a bit of income in this economy. From a philosophical level it is also really offensive because many of these laws have racist roots intended to prevent minorities from entering the marketplace.
When did running a small, productive enterprise become a privilege?
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