
You guys, I am scared to death that the Senate tax reform is going to become law.
Before I go into why, a disclaimer: I am totally not a political person and I am not posting this to bring up anything about either party. In this article, I’m putting aside the ACA inclusion, the wins for big business, and other factors included in the proposal to focus solely on the concerns of small business owners, indie authors included.
At issue is the fact that small businesses – sole proprietors like myself, LLCs, S-corps and partnerships – are what is called “flow through” or “pass through” businesses. This means that I don’t pay taxes as Lawson Gartner Publishing, even though that is my company. My business taxes pass through to me as an individual and I pay taxes on my business profits at a lower rate.
The way I understand it, the problem is that some corporations are managing to get away with being classified like us small business people and are therefore paying much lower tax rates than they should. Boo. (That’s as far as my understanding goes. Check out this article from Forbes or this one from The Washington Post for two experts’ takes.)
The biggest problem is that under the Senate’s tax reform, the itemized deductions we can currently take for professional memberships, conference travel, office expenses, marketing costs, etc. all go away. That is a death-blow to indie authors. Most of us have day jobs and can only afford to publish because we can write off these expenses. (This is in addition to many other deductions we would lose personally, like medical expenses, tax preparation costs, student loan interest, any mortgage interest above $10,000, etc.)
That means I am facing the possibility of going out of business if this law passes. Right now, I’m totally not managing my finances well – and I’m telling you that for the sake of transparency; we need more of that in the publishing world. I spend about 10x more than what I make. (Sad, but true. I’m working on that in 2018 since I now have two years of experience to help guide me.) When I get my tax refund each year, it’s about twice what I make and not quite a third of what I spend. That is not an insignificant amount and it’s what keeps me afloat (along with the income from my day job).
Besides lowering or eliminating my tax refund, what really sucks is I’d have to stop going to conferences, or at most only go to one a year because travel is expensive and many times the registration costs as much or more than your flight. Even though I don’t sell many books at those events, they are incredibly valuable for networking and learning. Plus, they give me a chance to expand my speaking career and attract new fans. While not doing this isn’t the end of the world, it’s a big blow to me professionally.
The silver lining is that even if the proposal passes, it doesn’t go into effect until at least 2022 (I’ve even heard as late as 2027). The way I see it, this means I have a few options for future business:
- Pray that I get a traditional publishing contract in the next four to 10 years and can stop relying on self-publishing. Ugh. I have four books in mind that I’m planning to try to traditionally publish once they are written, but I really don’t want to be beholden to the industry forevermore. I like being able to write what I want when I want, even if it isn’t “marketable.” I would really like to have the option to be a hybrid author in the future.
- Significantly scale back my self-publishing. Right now, I try to publish one or two books a year, which is all I have the time and money to do. (I’m still recovering financially from releasing four books in 2016.) My current pace is still considered slow, but it us adequate to keep my career going. According to conventional wisdom, if I slow down to a book year or every other year, I have very little chance of maintaining the momentum needed to make a decent showing as an indie author. But I will try it if I have to.
- Quit self-publishing all together, close my business and put all my eggs in the traditional publishing basket. See #1 above.
One thing is for certain: I won’t stop writing. I have stories that MUST be told or I will go crazy. Even if I have to stick them in a drawer for someone to publish after I’m dead, they will keep happening. But no one wants that to be the case, and I’m really uncertain of what the future will hold.
I very rarely contact my representatives, but I did for this. I highly doubt my voice will change the outcome, but I have to at least try when it is going to affect my livelihood, the thing that brings me more joy than anything else in the world. I have actually been praying about this. Those two things are all I can do.
And I’m one of the lucky ones. I have a day job that pays well that I can fall back on to pay my existing debt and, if I save, finance future projects. I can’t imagine how scared those whose only livelihood is their small business must feel. For me, this is about making my dreams come true; for so many it is about subsistence. All of this so that politicians can get a “win.” It’s just not right.