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March 4, 2013
Creating Stronger Communities
Small businesses are still having a tough time and new business startups are at a record low. They are suffering from slow growth and a bad economic cycle and they bear a disproportionate share of the regulatory burden. Obamacare and a higher minimum wage have a more destructive impact on the smaller businesses. Wall Street and the publicly-held companies have wider access to capital, better administrative infrastructure to comply with growing regulations, and more influence over regulations that will benefit them over the private sector.
To help with the burdens (often created by government) of the small business owners, government has established various bureaucracies and agencies funded by government grants to provide assistance to small businesses. These may include tax credit incentives to hire veterans and people on food stamps and other well-intended programs.
But a businessman does not mortgage his house and risk his capital to provide jobs for veterans (most would gladly do this without government incentives) and the unemployed. He takes this risk to better his own life and circumstances. Yes, he will likely go beyond the call of duty to help employees and other associates, but his ability to help others is contingent on his ability to generate a profit to provide the means to help others.
Along the way, somewhat regardless of his profitability, he will generates millions of dollars of property tax, fuel tax, and ad valorem tax that pays for schools and roads that everyone gets to use. He will generate state sales tax that pays for courts and infrastructure. He will pay millions in federal taxes of varying sorts that pays for benefits for everyone.
Yet the majority of these small business people will not make it. The few that do will continue to fund the local, state, and federal functions, and they will also fund health insurance for their employees and retirement funds that will reduce their dependence on social security.
They will also fund the expansion of their local hospital, the local schools, the effort to build a new courthouse, the local Chamber of Commerce, and various charities of their choice.
Their businesses will often provide opportunities for other businesses that also make similar contributions to their community.
Yet it was not the drive to contribute to their community that initiates this chain of events. Whenever those driven by "community" speak, it is rarely to invoke fiscal responsibility; it is more often to support greater extractions from the business community that is already funding a large portion of the bill. And more often than not those calling for contributing to the "community" are working for a nonprofit. The irony is usually lost on them.
But the larger cost is not the extraction from existing businesses. We can measure businesses that are struggling and we can measure the businesses that have closed or merged out of existence. But we cannot measure the businesses that were never started because of a risk and regulatory environment that discouraged a would-be entrepreneur. That is by far the larger loss.
I recoil when I hear a successful entrepreneur praised for "giving back to the community". This offensive compliment insinuates that his successes somehow "took" something from the community and totally ignores the enormous contribution he has already made. This criticism is not intended to discourage the charity and contributions these leaders make to the community; it is intended to understand how these benefits are generated so that we can reap more of them.
When the first lady belittles those who go to work for "profit" she belittles those who truly support the community. A community is only as strong as the individuals and the businesses that are able to support it. We do not create stronger communities by increasing the burden on small local businesses and then recycling the increased taxes on a shrinking base back to them through government agencies and grant driven nonprofits designed to help them.
We create a stronger community by making those agencies unnecessary.
Henry Oliner blogs at www.rebelyid.com
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