2 thoughts on “Tax Policy, Small Businesses, and the Myths that Consume the Discussion

  1. Ernie, I think you may have the wrong view on the subject. I would consider corporate tax loopholes more of an incentive to keep multinational corporations investing in the US. Closing tax loopholes will only further push these companies overseas. With rising wages and discontent in many of our traditional low wage countries (South African mines; Chinese Factories; etc.), the US has an opportunity to regain its production advantages, as our real manufacturing costs decline with the major setbacks to unions over the past several years.

    In my opinion, this will do more for small business than making the tax code more “fair”. The inherent unfairness of taxes is that the rich have become much more mobile. While it is complicated to create a corporate infrastructure that shelters taxes, the benefits easily outweigh the costs for larger businesses. Small businesses dont have the resources to compete and are traditionally much more local.

    Lastly, I would agree that an entrepreneur cannot be simply told to take more risk. The environment has to be ripe for individuals to start a business. This means increased spending on education, increased availability of small business loans, and a more robust economy where people have more disposable income to cushion a fall or shoulder the start up burden.

  2. I think we may be comparing apples to oranges here. Or at least oranges to grapefruits. Small business market penetration and multinational corporation market penetration in the long run, fare out a bit different. As Mike pointed out, small businesses are more local, tap into a smaller economy and thus don’t amass the production to meet the demand that large companies do. You might have to define what you mean by small and large business. Size? Profit? To suggest one is worse off and/or in direct competition with the other is like saying a rookie college QB is in competition with Eli Manning. Clearly the two are good football players, one just happens to appeal to a much larger crowd and meets a different type of demand. Asking Eli to play “more fair” on the green to appeal to the rookie’s goal at making the big leagues is not any fairer to ask. Eli keeps folks in the stands and money flow to professional sports. The rookie keeps college kids drunk and belligerent.

    If anything small business production, in some respect, hinges off the larger production of multinational corporations in the U.S. These loopholes provide an incentive, that incentive increases investment in the U.S. market, creating more competition, keeping prices low, jobs in abundance and production time faster. Overall, the more we encourage large businesses to invest in America the more jobs we could create. Small businesses create only so many jobs.

    With that said, I don’t like big business cheating as much as the next guy. I would tend to create a tax code that would ask companies to pay their share, according to profit and production. In an ideal world it might work. For now we will have to settle with capitalism rewarding large business over small ones. You have to pay to play.

    Keep businesses invested in America. Until we can fix the tax code so it rewards hard work, which is likely not to happen, then we shall contend with what we have. But don’t ask scare big business away just so a mom and pop shop can feel better about themselves at night. Stick to your demand and base and you’ll be fine. Reach to high, and you might find yourself crashing and burning.

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