This issue is a national issue but I place it at the top of my list because of a local issue (coming up next) which implements the concept at the lowest level of government - for a town or village. I have discussed this issue in one of my lawmall websites, Virtual Law Firm Website Describing "1st 3 Are Free" Issue and in my letter to President Clinton Letter to President Clinton Describing My Idea for "The 1st 3 Are Free". As I stated in www.lawmall.com/lm_virtu.html:
The burden of employees on the individual practitioner and small law firm should not be underestimated. The developer of LawMall has tried (without success, it should be noted) to enlist the help of President Clinton to cure this problem for small business and small law firms by urging adoption of the message underlying the rallying cry "The First 3 Are Free!", which would eliminate all rules and regulations as to the first three employees of any employer. * * *
In my letter to President Clinton dated August 15, 1994 I said:
Dear President Clinton:
Jobs, the economy, crime. These seem to be the main problems for most Americans.
There is something you can do to help cure these problems, something which hasn't been discussed before, apparently. "The First Three Are Free!" describes the solution. What I refer to is permitting anyone in the U.S. (such as you, me and General Motors) to hire up to 3 employees without any rules or regulations governing the relationship. The employee would go to the U.S. Post Office for servicing (for withholding taxes, reports, disability insurance and whatever) instead of taking the valuable time of the 1- to 3-person employer. Payments made to the 1-3 employees would include all taxes, which would then be paid by the employee, and the small business employer (up to 3 employees) would never be behind on payroll taxes or reports. Obviously, many of the 1-3 employees would not be earning large amounts because they would be more like apprentices, and there would be no loss to the treasury, but there would be a gain to the small business employer who no longer would waste his/her valuable time with paperwork and unpaid taxes.
These 3 employees would not be subject to any minimum wage requirements, enabling the employer (as to the first 0-3 employees) to pay nothing, less than minimum, the minimum, or more than the minimum. This would create a flexibility for small business to hire persons for apprenticeships without having to pay such persons more than they are worth. The effect of such legislation enabling this proposal would be the opening up of millions of new jobs, many of which would be valuable training programs with small business, which would create many more small businesses and entrepreneurs. Also, this would solve the "nannygate" problem by eliminating the reporting requirement as to most persons (since the workers would presumably fall within the 1-3 exemption).
Also, I developed the idea again at "The 1st 3 Are Free" Idea as Described in My partially-written eBook DROPPING OUT:
Taxation has made it unworkable for many small businesses to hire any employees, because of the amount of regulation, reporting, withholding and hassles which develop. This has led me to push for a national apprenticeship program under which any person (you, me, General Motors, or the A&P would be able to hire up to 3 people and pay them as little or as much as they wanted, without any reporting or withholding. I call this plan The First 3 Are Free, meaning that there would be no rules or regulations relating to the first three employees of any person (other than not being able to beat, maim or kill them; not being able to hire illegals; not being able to hire children or slaves). As to the IRS, if the IRS wanted, I would make out the weekly paycheck (if any) jointly to the IRS and the special employee, with that check each week being the last thing for which the employer would be responsible for as to the past week's work of the employee. This in effect would be a massive national training program for persons wanting to learn a business as an unpaid assistant or trainee, with the employer being free to pay as little or as much as the employer wanted, which presumably would be enough to keep the employee from going elsewhere, and be a free market for wages unhampered by the nation's minimum wage which deters many employers from hiring anyone. Persons in (or seeking to start) their own small businesses might be able to retain one or more assistants by making them independent contractors or partners, to avoid having to withhold and pay income taxes. But make sure you clear the specifics with an attorney or tax person before doing this, to avoid problems with the IRS.
The regulatory burdens are substantial, especially because anyone who is hired as a 1st, 2nd or 3rd employee is not wanted as a person hired to perform the substantial amount of added paperwork (tax forms, tax withholding, insurance for disability, insurance for unemployment, posting of notices for all 1-3 employees to read, ad infinitum). The unfortunate thing about this burden is that it falls on the only product person in the small- business organization, the person who is trying to found a new business based on a new idea for the purpose of providing good jobs for the community and a good profit to the owner. Federal and state law has imposed a near death sentence on small business growth by this excessive amount of regulation, which has discouraged most people in the U.S. from going into business for themselves, and instead they have elected to take whatever they can as a job, such as $8/hour from Wal-Mart for a partial work week of about 26 hours or so. By taking this burden off of small business, there would be the creation of perhaps 1 million new jobs in a very short period of time, perhaps within one year. Of course, this would not be good news for Wal-Mart or other major corporation, which would feel threatened if a majority of Americans had an opportunity to go out on their own to engage in business in competition with the monopolized businesses of big business.
As a result of national politics, it is a sure thing that my idea for "The First 3 Are Free" cannot be enacted into law, even though it cries out for enactment.
Well, is there some other way of accomplishing this? I believe so, and got the idea for this on December 13, 2005, when driving to Tunkhannock, Pennsylvania to met with a group of voters opposing a new Wal-Mart Super Center across from an existing Wal-Mart.