Must Read – How a 15% Corporate Minimum Tax Will Impact Companies and Sales Teams

You may have read that the latest legislation out of Washington DC provides $80 billion for the hiring, arming and training of close to 80,000 new IRS (Internal Revenue Service is the US Tax Agency) agents to nearly double the size of the agency.  Did you catch the part about arming IRS agents?  Wow. That makes the IRS larger than the State Department, Customs and Border Control, the FBI (Federal Bureau of Investigation) and the Pentagon (Military) combined.  Did I mention that 70,000 of them will be armed?  They also want to make sure that corporations pay their fair share so this legislation imposes a minimum 15% tax on corporations.

Why are they making these two moves and what does it have to do with selling?  Stay tuned and I’ll try to answer both questions.

The primary point of today’s article is to point out the irony of hiring 80,000 agents but you’ll have to read a bit of background before I can point out the irony.

So why are they hiring 80,000 IRS agents?

They want the rich to pay their fair share and that sounds fair, but let’s go beyond the headline and general talking point.  There are 724 billionaires in the US (of 2,775 worldwide) and it’s not that hard to find a millionaire because there are 20 million of them in the US (50 million worldwide).  If they target billionaires it would work out to 110 new agents per billionaire.  Sounds like overkill.  They also want to make sure that corporations pay their fair share so this legislation imposes a minimum 15% tax on corporations.

Let’s focus on the 15% tax for a moment. I can think of only three ways for corporations to deal with that surcharge:

  1. Raise prices.  They’ve been raising prices throughout the supply chain crisis and the two years of inflation so additional price increases don’t seem like they would be good business decisions.
  2. Lay-offs.  To illustrate how the math works, let’s take a corporation generating $10 billion with pre-tax earnings of $1 billion.  A 15% tax would be $150 million.  They will probably layoff workers, not executives and the average  US worker earns just short of $52,000. That corporation would need to layoff 2,885 workers to pay that tax.  Or, if they need to purchase equipment they’ll either delay the purchase  or layoff even more workers.  If they delay or even cancel the purchase, that will negatively impact salespeople and the companies that sell equipment to this corporation.
  3. Move operations out of the country.  In this scenario, everyone gets laid off, no taxes are paid by either the company or the laid off employees, and nothing gets sold to this company in the US. Salespeople and their companies lose here too.  When companies move operations off-shore, and with fewer customers for the companies serving them to sell to, they too must lay-off employees.

This impacts every one of the 56,000 companies generating $100 million and up. Do the math. If we were to be really, really conservative and pretend that all 56,000 companies generated only $100 million each, that would result in layoffs of only 1% of my earlier example, or less than 30 layoffs per company.  The math says that if you multiply 30 by 56,000 companies there would be nearly 2 million layoffs among the 56,000 companies, huge spending freezes, and delayed closings as the economy slows like gridlock at rush-hour.  Only it will be much worse.  Nearly 14,000 of those companies actually generate more than $500 million (2 million layoffs among the 14,000 companies) and 9,000 companies generate more than $1 billion (2.6 million layoffs among the 9,000 companies).  That’s a total of 6.5 million lay-offs before we consider the ripple effect to the millions of SMB’s.

Does anyone in Congress know even a little bit about economics and how business works?  Around 175 senators and congressmen have law degrees, so probably not!

Back to the IRS and then the irony of the policy.  80,000 new agents will run out of large companies to audit really quickly.  It’s less than one company per new agent so who will they audit next? There aren’t enough large corporations, billionaires and millionaires for such a huge army of agents so it’s obvious that they will be targeting another group next.  It was reported that small businesses will be targeted because big companies can afford teams of lawyers and accountants to drag out the audit process but 17 million small businesses are much easier to audit and assess and then from which to collect additional taxes. Auditing small business owners is the path of least resistance!

Let’s dig into the irony.

For the past 3-4 years, companies that have attempted to hire salespeople have found a limited number of candidates overall and even fewer quality, qualified candidates. When they hold out for the good candidates, instead of 30 days it is taking 3-6 months to get new salespeople hired and half the time, another company swoops in and hires the candidate before they can.  This is the experience companies are having today despite the existence of nearly 6 million professional salespeople to target in the US.   So how in the world will the IRS possibly hire 80,000 new agents when there are only around 1.4 million accountants in the USA and only 650,000 of them are CPAs?

Both parts of this legislation couldn’t possibly make sense to anyone who can do math, who knows how business works, who knows anything about economics, or who knows what companies do with their earnings.  It is a stupid policy and stupid policy is probably an oxymoron.

If the 15% minimum tax policy becomes a super spreader for the recession it will impact salespeople and companies where it hurts the most by significantly depressing revenues and earnings. If that happens, the 15% tax won’t be such a big deal because there won’t be any earnings to tax.  So there’s that.

To prepare for a more difficult selling environment, sales teams must learn how to grind it out to book difficult-to-schedule meetings, differentiate and sell value, overcome resistance, and reach the only person in the company who can make an exception to a spending freeze.

There are three steps to getting your team to this point:

  1. Evaluate the sales team to find out who can become proficient at these competencies, how big the gaps are, how much better the sales team can become, how much more revenue they can generate, what it will take to get them there in the area of sales process optimizations, methodology, training and coaching.
  2. Train and coach the ever-living hell out of your sales managers so that they can become great at coaching salespeople and holding them accountable.
  3. Train and coach the ever-living hell out of your salespeople.