business news in context, analysis with attitude

I suggested yesterday that it might make sense - and stimulate the economy in all the right ways - if the federal and state governments gave businesses a tax holiday for the first quarter, allowing them to keep more of their money and therefore keep more people employed.

I conceded that I am not an economist … and invited MNB readers to disabuse me of this notion.

One did:

You noted that you wanted to hear why your quarterly business tax holiday is a bad idea, so here's my view.  Oh, and just to be clear, I appreciate that you are thinking about solutions and only write this based on your request, not to discourage you:

 1.  Most business taxes are based on income, not revenue.  The hardest hit businesses will be anticipating a loss for the year, and will instead of making tax payments on their estimated income, they'll be booking tax losses in hopes to offset profits in future years.  The biggest beneficiaries of the tax holiday would be profitable businesses that owe more in taxes because they made more money.  Many businesses in your audience, including my own, are thus far having their best spring ever (financially anyway) as they have record sales.  So grocery stores and their suppliers will get a tax break when they are the least in need, while restaurants, airlines, hotels, barbers, etc post record losses and have no taxes to pay anyway.

 2.  Relief on revenue based taxes, like the new 'Commercial Activity Tax' in Oregon, will cut into a lot of businesses' cash flow at the worst possible time when the first payments come due this April (sorry to get political, but actually I'm not sorry!).  Property taxes would fall into this category as well.  Relief from taxes like this would proportionately benefit all businesses, but not produce outsized benefits for businesses most in need.  If lawmakers did something here, it would be at the state/local level, so less ideal if you are looking for a national solution.

 3.  As for the administrative headache of making sure businesses use the money for the 'right' thing, that just makes my head spin, but I'm sure others will help you with that one.

The thing that will bring businesses to their knees are fixed cost obligations: payroll, rent, lease & loan payments.

Rent & Loan Payments:  The more federal regulators can do to leave room for banks to create reasonable forbearance plans for corporate and individual borrowers during this time, the better; that doesn't mean anyone has to forgive loans, but programs to suspend payments for however long we are in this, and re-amortize the loans afterwards will go a long way in helping everyone manage their cash.  More complicated, but just as necessary, would be some mechanism to deliver similar results to renters; if we've given landlords room on their loans its very reasonable to expect that they grant the same to their tenants.

Payroll:  I think we need to take a hard look at the unemployment insurance system, ensure that it is meeting the needs of the current situation (and it certainly isn't), and not frown on businesses that lay off employees to allow them to turn to this resource.

Then there's the question of how do we pay for it?  Well, that hasn't stopped us from building new fighter jets or continuing to add layers of security to protect our representatives in DC.  (again with the politics!)

Now maybe I can hear about all the flaws in my plan.  I'm glad I'm not in politics.

I wrote the other day about the importance of communicating with customers, and have used both Stew Leonard's and Kroger's Rodney McMullen as examples of how to do it right via video messages.

MNB reader Larry Ishii responded:

I cannot agree with your feelings more, Kevin. I spent over 50 years in the grocery industry and have always had huge respect for Kroger. I was with Food 4 Less for Alpha Beta, Ralphs, Fred Meyer and, finally, Kroger. I stayed that first year with Kroger and became all the more impressed for who Kroger is, how they operate, and their respect both customers and associates alike.

From another reader:

In an unprecedented time, I found Stew’s message to customers the right balance of being informative about what they’re doing to mitigate the spread of Covid-19 but also comforting.  His communication style is that of “my favorite uncle” reassuring and warm.  Although I live in California I can appreciate why customers love shopping there based on this video.

On a related subject, MNB reader Don Goodwin wrote:

Thanks for your story on the companies communicating with their customers. In defense of Airbnb, I want to share that I cancelled a trip to Brazil outside of their refund policy. I challenged them via their help desk. They responded beautifully with a full refund acknowledging the situation.  I am a big Airbnb fan and thanked them for their sensitivity to the situation.

I'll join you in lauding Airbnb.  My three kids were scheduled to go to Ireland on vacation in a couple of weeks - it was their Christmas present from Mrs. Content Guy and me - and when we reached out to Airbnb to cancel their reservation, they gave us a complete refund, no questions asked.  It took some time to get through to their help desk, but it was worth it.

On a different subject, MNB reader Gene Wild wrote:

I saw your video today about CORVID-19 and how you hadn’t gotten any emails from food retailers. Just want to let you know that I received an email this morning from Meijer CEO Rick Keyes. The letter addressed how the company is increasing the frequency of store sanitization (including team member areas) and encouraging team members to remain at home if they’re not feeling well. Rick mentioned home delivery and Pickup services are following the same sanitary guidelines. He also asks for patience for items that are seeing abnormally high demand.

I found this to be very reassuring. It does however make me wonder what the other retailers in my area are doing to prevent the spread of CORVID-19?

Regarding whether companies like Walmart and Target should license Amazon's checkout-free technology, one MNB reader wrote:

If those companies want that kind of technology, personally I think they should create their own or write a very exclusive contract elsewhere. They must maintain exclusivity of their own data. If Amazon offered its system for free they shouldn’t take it. Amazon’s goal is to own all the data. Why should either of these companies pay to give it to them? Why would they want any competitor to have it? 

Go isn’t about the stores, probably not even about the technology. It’s about the data. 

(Til the US changes it’s data privacy laws, anyway).