The great thing
about capitalism is that anyone can start their own business. It's the
When conceptualizing this, the narrow view is that an entrepreneur starts
a company in order to make a profit. End of story. The broad view is that
the entrepreneur takes her hard-earned money, puts it at risk by starting
a new company, provides new jobs, and offers the public a new product
or service that everyone will benefit from (even those not directly involved).
Unfortunately, it's this latter view that is often overlooked. In fact,
it's remarkable how a company's power to improve the quality of our lives
goes so largely unnoticed by those in Washington.
Imagine all of the brilliant students who are graduating from college
this year. There will be hundreds and thousands of newly-crowned doctors
and engineers and computer programmers all ready to strut their stuff
in the private sector. But what if no companies are waiting for them when
they step off campus? What if the economic environment in this country
is so unattractive that no employers are willing to use their limited
resources to hire these talented young men and women?
If that's the case, how do you measure the waste, the squandered time
that could have been used to find the cure for cancer or the new efficient
fuel replacement for oil? For the most part, you can't. Opportunity costs
can't be quantified when the benefits that could have been reaped are
not just immediate but are compounded over several years. Also, if you
tried to quantify it, do you measure it in lives lost or dollars thrown
Our leaders dismiss these costs and continue to charge punitive taxes
when the solution is just the opposite. And all for the sake of what?
Eliminating deficits? We know that deficits are created from massive spending,
not massive borrowing. We also know that deficits can be eliminated not
by raising taxes, but by reducing them. So then why are high taxes still
Consider this: I recently spoke with a small business owner in South Dakota.
As an employer of 26 people, this company's owner figures that he pays
more than 50% of his profits in taxes. Take into consideration that he
has to pay federal corporate taxes of 35%, federal payroll taxes of 7.65%,
and combined state and federal unemployment taxes of 1%. While South Dakota
doesn't charge a state income tax, it doesn't relieve the owner from out-of-state
sales (each respective state will charge him accordingly). And don't forget
about property taxes.
Add all of these figures together and he still isn't done. Remember, the
government requires proof of compliance. Tax returns, certified audits,
and accounting reviews all cost money to prepare. Call compliance costs
what you want, but in the end they are still "taxes" on doing
Many voters and politicians will read this, nod their heads, shrug their
shoulders, and recognize the absurdity of it. Then, come next November,
they will forget it and without shame request that local property taxes
be raised in order to finance new school buildings for our kids. I mean,
education should be a top priority, right?
The thing is, all of this comes down to refusing to accept sound economics.
Perhaps it is a reflexive notion. Intuitively, it makes sense to raise
taxes in order to pay for something like a new school building, right?
Unfortunately, that's just not the way it works.
Raising taxes, or even merely keeping rates where they are, hurt the economy.
We are the land of plenty. We can unleash huge amounts of wealth into
our system simply by forcing our politicians to get out of the way.
As Walter Williams of George Mason University recently wrote, "In
medicine, misdiagnosis leading to mistreatment and further injury can
lead to malpractice suits. Unfortunately, in politics, misdiagnosis, mistreatment
and further injury lead to re-election."