Archived post

This is an archived post. Please click here to see the latest entries.

« The Zitzewitz Files: SAT Scores | Home | Schools for MacArthur Fellows »

Where Do My Profits Go?

I own a business in Lebanon, NH, just across the town line from Hanover: the River Valley Club. It is an important part of people’s lives — our members work out about eight times per month, which is twice the national average for health clubs — and for a club our size we have the largest personal training program in the nation by a multiple of about five. The health club business is tough, particularly due to the expense of having a large staff, but we make a decent profit for a small business — until we have to pay the various taxes that all levels of government extract from us.

Economics Professor Meir Kohn likes to use the phrase “predatory government,” and it is apropos in our case: federal, state and local governments take two thirds of our profits, a full 66% of what is left after we have paid the staff and vendors we need to operate on a day-to-day basis (note: I draw no salary):

Taxation of Profits.jpg

In the expense area, first off we pay our employees’ wages and our contribution to their health insurance. We have always been generous with health care (unlike most health clubs), and Obamacare’s new obligations won’t change anything for us. We also pay our vendors for equipment, utilities, outside maintenance, supplies, etc. After all those costs, in 2014 we were left with profits of 13.4% of our total sales. Not great, but not bad in a year when we plowed a lot of money back into the business.

Then various governmental entities take their deep cut of our profits:

— Payroll taxes on employees’ salaries amount to about 9% on top of our total compensation bill. That is, every time we pay out a dollar of wages, we pay a total of $0.09 to Social Security, Medicare, Medicaid, Unemployment Insurance and so on. With over 150 employees, that figure adds up to a lot of money.

— The Club is an LLC, a transparent entity, so profits are taxed to us as personal income. Fortunately, payroll taxes, real estate taxes, and state income taxes are deductible. On what’s left, our federal income tax rate is in the high 30%’s.

— Real estate taxes in Lebanon run at about 2.5% of the assessed value of land, buildings and equipment. Not cheap — nor easy to stomach, given that municipal employees are better paid and have more generous benefits than our own employees.

— Though New Hampshire levies no tax on personal income, transparent entities pay a Business Profits Tax of 8.5%, and companies pay a Business Enterprise Tax of 0.75% of wages and interest paid out.

The way that I figure it, from New Year’s Day until the end of August, I work for the government; only starting in September do I begin to work for myself. Of course, were I to sell the Club and invest my money in the stock market, my capital gains tax rate would only be about 20%. Anyone want to buy a health club?


Featured posts

  • August 14, 2013
    Breaking: Of Crips and Bloods and Memories of Ghetto Parties
    History repeats itself, first as tragedy and then as farce, or sometimes it just repeats itself. From the New York Times on November 30, 1998: At Dartmouth College, white students at a ”ghetto party” dressed…
  • June 25, 2013
    Dean of the College Charlotte Johnson’s War on Students Part (2/2)
    Part 1, Part 2 Today’s post again recounts the events that befell the Freshman. However, the content of the Hanover Police department report reproduced in this space yesterday is supplemented by information from my own…
  • October 18, 2009
    When Love Beckoned in 52nd Street
    We were at San Francisco’s BIX last evening, enjoying prosecco, cheese, and a bit of music. A full year of inhabitation in Northern California has unraveled to me no decent venue for proper lounging, but…
  • October 9, 2009
    D Afraid of a Little Competish
    So our colleague and Dartblog writer Joe Asch informed me that the D has rejected our cunning advertising campaign. Uh-oh. The Dartmouth is widely known as a breeding ground for instant New York Times successes,…
  • September 4, 2009
    How Regents Should Reign
    As Dartmouth alumni proceed through the legal hoops necessary to defuse a Board-packing plan—which put in unhappy desuetude an historic 1891 Agreement between alumni and the College guaranteeing a half-democratically-elected Board of Trustees—it strikes one…
  • August 29, 2009
    Election Reform Study Committee
    If you are an alum of the College on the Hill, you may have received a number of e-mails of late beseeching your input for a new arm of the College’s Alumni Control Apparatus called…

Dartblog Specials

Subscribe by Email

Enter your email address:

Help, Pecuniarily

Please note

This website reflects the personal opinions of its authors. Any e-mails received may be published along with the full name of the sender. If you wish otherwise, please say so.

All content appearing at should be presumed copyright 2004-2018 its respective bylined author unless otherwise noted or unless linked to original source.




May 2018
Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31