With so much of the conversation in this election focused on what will make small businesses happy and motivated, I thought it might be valuable to get an entrepreneurial perspective. Not from a chamber of commerce lobbyist, talking head or rich chief executive who forgot what being a small business owner even means — but a real one.
I have been a business owner for all but three years of my adult life, as was my father, my mother, four uncles, two aunts and one cousin. Some preach small business. I bleed it.
First and most importantly; the profit motive is overrated.
Our motivation is not that different from anyone else's. Teachers aren't driven by a big payday and an ER nurse isn't likely to get a beach house in Malibu, but somehow they manage to make a career choice that isn't dictated by a profit motive. Those same forces drive small business.
We make choices based on what we are good at and what holds our interest. Sometimes it is the challenge to succeed, not just in terms of money, but making something from nothing and the independence that it brings.
The point is that setting policies designed to merely increase profit does nothing. We need education, infrastructure, access to capital and customers with money to spend. We don't need a tax break to hire employees because we only pay taxes on the money we keep for ourselves. Profits we do invest in capital equipment we get back through depreciation, and under the new Obama proposal we get it back right away — a pretty sweet deal.
Tax cuts don't help businesses grow.
The guiding principal of the free market system is that companies succeed by being more competitive and delivering a service or product that attracts more customers than the other guy — kind of an economic Darwinism. A tax cut isn't a customer, never bought anything and doesn't have anything to do with all those reasons we started business in the first place.
Back when supply side economics was popular, about the time I got my degree in economics, I had lots of debates with the conservative policy wonks in Claremont where supply side economics was invented. It is amazing how many economists never ran a small business.
This is why giving tax cuts to already successful businesses won't help: If the government gave my father a check for $10,000, essentially what a tax cut entails, the money goes in the bank or takes a trip to Las Vegas. Nothing about his business model has changed to force him to employ anyone or buy a new piece of equipment. The only thing it has done is inspire him to hire a lobbyist to get him more tax cuts.
If you put that money into the hands of his customers, he would get a share of that $10,000 by competing with other companies. The increase in sales would drive him to hire someone or buy a bigger piece of equipment to accommodate the demand. The bottom line is that taking away the tax cuts for the richest 2% of earners in this country won't keep them from still getting the money, it's just that they'll have to actually earn it.
Of course, tax cuts don't help any business on the ropes in this economy. They only help those already making money, and they don't need it. Isn't that ironic.
While it is universally accepted that the only thing more boring than economics is trying to explain it, it is the most important thing on people's minds in this election cycle. With all the talk of class warfare, I hope to give the 98% of America that most needs help the permission to wage it. It's okay to tax the rich again. Break them of their addiction to lobbyists and get them back to making money the old fashioned way — earning it.
As one of the companies who may have to pony up a little extra cash under Obama's proposed tax plan, I say bring it on, happy to do our part. After all, blaming Obama for a lackluster economy is like blaming the aspirin for not fixing the hangover brought on by eight years of tequila shots. Better to ride it out.
Maybe the pain will keep us sober for a while as opposed to taking the old bottle off the shelf for another round to dull the pain.
MICHAEL TEAHAN lives in the Adams Hill area of Glendale with a clear view of the Verdugo Mountains so he can keep an eye on things. He can be reached at email@example.com.