The Great Business - Government Schism
There is plenty of disingenuous discussion when it comes to entrepreneurs, businesses and their contributions to America. The most recent polemic is that the business class is not doing their fair share to help America by paying it forward. Thanks to some catchy political word slinging from a certain Senate candidate from Massachusetts, many people are banding together to rail against these greedy entrepreneurs. Unfortunately, such rhetoric runs counter to reality and offers no tangible solutions.
Businesses pay taxes as well as the entrepreneurs that build those businesses. While much of the press attention is dedicated to stories about businesses that pay no taxes and executives that pay less tax than their assistants, the truth is that the tax burden falls heaviest on businesses and business owners. We are not talking about Fortune 500 companies and their CEO’s or hedge fund managers. We are taking about people that actually built their own businesses from the ground up that helped make America the economic power it is today.
The contributions of entrepreneurs however fall on deaf ears in Washington. Entrepreneurs take all the risk, drain their life savings, and sacrifice their time and energy and families to take an idea and mold into a real profit generating enterprise. If they manage to get traction, they hire employees, buy equipment, lease office space and pay taxes. How much tax do these businesses pay? If they are a C corporation, they pay 35% of income per year in federal tax, not including additional state and city taxes that may be imposed. While deductions and credits can be applied, the taxes that companies pay, particularly small businesses, do not waver greatly. Remember also that businesses pay payroll taxes, various excise taxes based on industry, and a host of other taxes and fees.
The sleight of hand by liberal politicians, union leaders, Wall Street protesters and others of like mind is in obscuring these facts from Americans. They want to make us resent the business class as ungrateful, greedy robber barons that steal from the middle class. We should storm the offices of these fat cats because they are not giving back to society and government. On the surface, the idea of “paying it forward” makes sense and has been a key part of the populist thread driving the current political conversation. This is simply an extension however of a broader political narrative that has been broken for the past three decades.
The turmoil of the late 60’s fostered the first inklings of suspicion about the broad role of government. While much of the attention centered on Vietnam and civil rights, some witnessed other troubling trends such as the decline of cities, costly urban planning experiments, expanding government programs and growing bureaucracy. Thus the beginnings of the great schism in liberal and conservative political thinking began; liberals stood for strong government institutions and programs while conservatives stood for smaller government and greater individual enterprise.
Our current political debate can be summarized as “government is incompetent” versus “business is greedy”. There are elements of truth on both sides. For example, Wall Street continues to shirk its responsibility for its role in causing the current economic situation, while government continues to spend money it does not have on massive entitlement programs. The sheer complexity and size of our country necessitates a large government. At the same time, business is ultimately the generator of economic output. When the two worked well together, we built the space industry, interstate highways, ports, nuclear energy, the Internet, and many other highly valuable assets that are pillars of the US economy.
What gets lost in this political shuffle however are the vast majority of businesses and business owners that are merely trying to stay alive and be profitable. In fact, businesses contribute 10% of overall tax receipts in the US. Instead of browbeating them for building something and insinuating they do not contribute, it might be wiser to implement policies and tax reforms that distribute the burden more fairly across businesses by using progressive tax structures ,(it starts at 34% as low as $75K) , closing loopholes, and ending politically motivated subsidies. Small businesses and startups should pay significantly less taxes so that they can have more cash to take advantage of opportunities, hire more employees and focus on growth. Smarter tax incentives and credits can be implemented to encourage companies to repatriate foreign cash and to spend their cash reserves (which total upwards of $1.2 trillion right now).
You know where those roads and police forces and fire departments came from? Tax dollars collected from people that earned incomes from jobs created by entrepreneurs risking it all. To be clear, if we want a country where our government creates jobs and drives economic growth and spurs innovation, that is a very different country than the America that has existed for over 225 years. The problem is that planned economies run by government minions have been proven to be utter failures. The America we know is one that celebrates risk taking and entrepreneurs, fosters innovative and creative thinking, and is proud yet hard working. Let’s not make the mistake of dividing government and business and creating an “us vs. them” dynamic.
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