"Small Business Week"

 

 
Small Business Week?  One week out of 52. Really?  That's not gonna change anything.  It won't improve conditions for small business. To change things, every day would have to be Small Business Day, all year long.

Presumably, things cost a little more at a Small Business store. Are you willing to spend the extra money? Do you even have the extra money to spend? Maybe, for one day of Small Business Week. Maybe, for the whole week. But how often do you go to the store? And will it every time be to a Small Business -- even for just the one Week? I have my doubts.

Small Business Week is just something to make shoppers feel good about themselves. Or maybe, I dunno, maybe it's just to make us feel good about Google.

 
If you want to change things, you have to change policy. 

If you want to make things better for small business, you could start by equalizing the tax advantage created by the business income tax. I've said this before. The business income tax is a tax on Net Income. Pretty much all the money a business spends is subtracted from taxable income; that part of business income is not taxed. That's why business people get a receipt every time they spend money: to document the spending, so they can write it off.

Rule of thumb, the income a business spends is not taxable income. Therefore, the more a business can afford to spend, the more of a tax break the business gets. Big business gets a big tax break. Small business gets a small tax break. THIS IS WHY SMALL BUSINESSES SO OFTEN FAIL, AND WHY BIG BUSINESS CONTINUES TO GROW BIGGER.

The solution is simple: tax gross business income instead of net business income. This will eliminate the tax advantage for "bigness".

This solution increases the tax base by a large amount. If we do it, we must also reduce tax rates by a large amount. For me what makes sense is to reduce the business income tax rate so that revenue to the government stays unchanged. I mean, assuming the existing business tax revenue to government is at the level we think is right, we want to keep it at that level; the tax rate should be reduced enough to make that happen.

In total, then, the business income tax will generate about the same amount of revenue after the change as it did before. That doesn't change. What changes is that the tax advantage for bigness disappears. Business that spend small amounts (and have relatively small gross income levels) will pay less income tax under the new plan. Business that spend large amounts (and have relatively large gross income levels) will pay more income tax. The tax advantage for bigness disappears. The tax advantage for bigness disappears even if the tax rate is a flat rate that applies to all businesses regardless of size. (But whether or not to adopt a flat rate is another question.)

And since the income tax is a tax on income, not on spending, even the high profit high-tech firms like Google will lose the tax advantage for bigness. And Amazon and Meta.

If you want to change things, you have to change policy. 

 

Capitalists will object to the idea of taxing gross business income, because most of that income is "their" capital. They earned it once, they paid tax on it once, and they think they shouldn't have to pay tax on it ever again. They think their property is sacred.

Render unto Caesar.

In my experience as an employee, it seemed to me increasingly true that employers were moving into the realm of "divine right", like kings in Europe in the Middle Ages. Divine right is the ultimate expression of "property is sacred".

"Property is sacred" is incompatible with the redistribution of wealth. Big or small, these kings of U.S. business will want "their" money to remain untaxable. But untaxable revenue has a tax advantage that only draws more money in. If all of that money remains "sacred" and untaxable, concentration of wealth is the inevitable, inescapable result.

• The tax on net business income gives the biggest tax advantage to the business that spends the most.
  
  
• A tax on gross business income using progressive tax rates gives the biggest tax advantage to the business with the lowest tax rate. This option could offset the problems created by our long reliance on the net business income tax.
  
  
• A flat tax on gross business income equalizes the tax advantage; this should be the long-term goal — unless human nature is more problematic than I think.
  

 

When the growth of wealth outpaces the concentration of wealth, civilization grows. When the concentration outpaces the growth of wealth, civilization declines.

Finally, then, the issue is whether we allow capitalism to have its way, so that wealth continues to concentrate until civilization can no longer survive, or whether we reverse the concentration of wealth and allow civilization to recover.