Re: O'Neill's "Price of Loyalty"
- I don't see anything proposed in this article. Perhaps those are to
be infered from the "problems" listed for small business creation
1) a negative pshychological environment was created by talk of
terrorism and by badmouthing the state of the economy
2) taxation on individuals has risen while corporate taxes have been
3) it would be easier for large businesses to budget for compliance
with uniformly applied regulations than small businesses
4) consumer debt is high
The first issue in the list is a matter of data and its effect on
investment behaviour. Entrepreneurs have the task of evaluating data
and undertaking new ventures based on their assessments of risks and
possibilities for profits. The authors are suggesting that the data,
in the form of hyped terrorism threats and business difficulty, is
causing potential entrepreneurs to be more conservative than is
warranted. Telling these people that they are being too wary may
change some minds, but other people would want new data or analysis
telling them WHY they are wrong. Even while claiming that there is
too much caution, the authors say interest rate risks should be a
matter of much more concern.
Are we to correct 2) by raising corporate taxes or by lowering
individual income taxes? Of course, lowering taxes raises the federal
budget deficit and there are reasons not to do that.
The tax on personal incomes has risen because of the social security
tax. The social security tax is paid by workers and isn't a priority
for tax cutting politicianss who are in the service of wealthier
Americans. A social security tax cut has little chance of passage
while the political momentum is for reducing progressive taxes and
while the deficit is even a minor concern.
Perhaps the letter is suggesting (in weak, veiled language) that the
political tide should be reversed. Is raising corporate taxes the way
to do this? (I think Paul O'Neill might disagree.) In any case, a
much clearer case needs to be made, along with the evidence that it
would help local economies.
Finally on the tax issue, small businesses' special relationship with
income taxes would be a necessary part of any such analysis. To evade
taxation, many small business owners and employees don't report all of
their income. For that reason it is easy to overestimate the stimulus
that a tax cut would provide to entrepreneurship. There are also tax
reasons for individuals to claim to be a small business owners. A
famous example is the tax writeoff one can obtain for a passenger
There seems to be much agreement that the tax code needs to be
overhauled and simplified. That might help those small businesses
that aren't in it for the tax advantages and who's owners aren't
investors in corporations that move offshore. The authors of the
letter may not have wanted to dare propose that much, but a tax
overhaul may be a large part of the solution.
The harm or danger that a regulation is intended to prevent would
usually exist in both small and large businesses. The last I heard,
businesses that can be classified as small are exempt from some
regulations. The discriminatory application of regulations should
serve some positive purpose that offsets the harm that arises where
the regulations don't apply. The presumption is that the good for
small business competitiveness positively offsets the harm that comes
with regulatory avoidance. Many of us would prefer to know that this
conclusion was the result of examination and not lobbying.
The authors would like to see consumers taking on less debt so that
interest rates would fall even more. Small business could then afford
capital to expand. However, both job exporters and local firms
benefit from lower interest rates.
If people do follow the advice to save more (or not go so far into
debt), cutbacks in consumer spending may likely fall more heavily on
local goods and services - such as restaraunt meals and massages -
hurting local commerce.
I'm missing something.
--- In email@example.com, Richard Risemberg <rickrise@e..
> Interesting analysis & proposal, putting forth the concept thatencouraging small businesses will be better for the economy than
pandering to corporations. Since we already know that that is better
for communities, this could be useful to us.