June 6, 2016

Acute vs. Chronic Harm

ThreeSourcers are familiar with the fact that concentrated interests, i.e. special interest lobbying groups, have an advantage when lobbying government over diffuse interests, i.e. individual taxpayers. A similar inequality [yes, I admit the gratuitous use of a leftist dog whistle term - anyone think it will prompt the righteous indignation that is due? - me neither] exists in the harm done to commerce by government.

Americans for Prosperity's Brent Gardner writes in a WSJ piece that multinational corporations are well situated to demand and receive special treatment from government. On one hand I support such behavior, on the grounds that government should not be taxing corporations in the first place. But government should not be taxing mom and pop businesses either, and they have less leverage to fight the (equal) injustice.

To coin a phrase, the harm to a large company is often acute where the harm to thousands of small companies is chronic. Large companies are often unable to pursue a particular market without these special carve outs. Not only can they do something about it, they have the accounting and business development wherewithal to be aware of it in the first place. Many entrepreneurs simply wonder why its so hard to keep the doors open. One large hint: Taxation.

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But the villain in this story is not multinational corporations, nor any large business. It is the government who favors them in naked surrender to the power of their concentrated interest. Gardner:

If state and local lawmakers are truly interested in spurring job creation and economic growth, they have better options than handing out taxpayer money to a lucky few.

States could start with eliminating tax carve outs and replacing them with lower-overall tax rates and lighter regulatory burdens. Federal lawmakers could also do their part by lowering America’s highest-in-the-developed-world corporate tax rate. These already proven ideas would help states create a healthy economic climate to attract businesses and investment.

Embracing these policies would protect taxpayers, who should never be forced to fork over their money to companies that include multinational firms with multimillion-dollar profit margins. Consumers and taxpayers will also benefit once a level economic playing field forces businesses to compete with each other based solely on the quality of their products and services.

Readers will note that the entire excerpt starts with the word "if."

Economics and Markets Government We're from the government, and here to help. Posted by JohnGalt at June 6, 2016 2:52 PM

Richie B's was a house favorite and I am sad to see it go.

From the Erie Facebook page I learned that several vendors had not been paid, and that employees had not received paychecks. Without disputing Gardner's (excellent) editorial or underestimating the burden of taxation on small businesses with strait-out-outta-central-casting authentic New Yorker proprietors, it seems trouble went deep.

The State, with its monopoly on violence, however, gets to be the one to shut you down and lock your doors.

Posted by: jk at June 6, 2016 5:14 PM

Thank you for making my point: Vendors and employees, who gave something of value to the business have limited recourse when they aren't paid. Contrast that with the State who, when not paid "the Gov'nors share" as they say, seizes your shit and auctions it to pay your taxes due. I s'pose if there's any left over they might divvy it up between the creditors, at pennies on the dollar. But the Gubna comes first.

And my other point- that entrepreneurs like this, even when they DO no how to keep cash flow positive, don't have the spare time and knowledge to calculate just how much better off they could be without government's boot on their neck, and go blackmail government to cut them some slack.

But it's okay, because that same government has an "Office of Economic Development" whose job is to make sure that the money coerced from establishments like Richie's gets doled out to others - in the name of "helping small businesses." Gee, thanks.

Posted by: johngalt at June 6, 2016 6:40 PM | What do you think? [2]