Over the past decade or so, publicly held Fortune 500 companies have contributed to a decrease of over two million jobs. At the same time, privately held and family owned small businesses have contributed to an increase of eighteen million jobs, as well as over half of our GNP. According to the Census Bureau, 98.3% of all businesses are less that one hundred people.
What is that saying? Small business is actually running more of this country than big business. Family owned business is putting people to work while big business is laying off. So the truth is, small business is the reason this country is as strong as it is. That doesn’t sound right, because most of what we hear in the media is about all the control, power, and greed big business has. What you don’t hear, is how much of the opportunity available in America is made possible by mom and pop shops all around this country.
We are hearing a lot of rhetoric in the media of how badly big business can ruin this country with tax loop holes. In fact, my post yesterday seemed to hit a nerve on both sides of the discussion….or argument, however you look at it. Because there is so much discussion of the top 1% and how much they need to pay more in taxes. What’s getting missed is that the top 1% isn’t made up of billionaires. In fact, it’s not just made up of millionaires either. It’s folks that are making more than $380,000 income a year.
Who’s does that consist of? A lot of small businesses that are employing most of America right now. While the discussion seems to be about how the high incomes of big corporate CEO’s need to change, we have to realize that they make up a small percentage of the 1%. If we tax the daylights out of the top 1%, we’re not just making those CEO’s pay for it all, and it’s not going to get rid of your personal debt, instead, it’s going to be putting more tax on the companies that are adding jobs right now.
In turn, those companies will begin to slow down in the hiring process. Why? Because when you have to spend more money, your bottom line gets smaller. When that happens, you do what’s called tighten up. In effect, you stop hiring people, so you spend less money. And the additional taxes get passed on to…wait for it…the consumer! Yep. Even though I heard an “expert” on TV the other night explain how increased taxes to business get passed on to either labor, or the owner. WHAT?!?! This person obviously has never owned a business. And just how do you pass expenses on to labor anyhow?
And I can promise you that no owner in his right mind is going to look at increased taxes and say that they are going to suck it up and not pass them on to the consumer. That’s exactly where it’s going. It only makes sense. So, I wanted to take a different turn with the topic of the 1% today and see just what you thought when it comes to small business. So the question for today is, do you think that the bad decisions of a select few big business CEO’s should be passed on to most of the small businesses in our country?
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Well,isn’t that how it already is? Big business screws up, government bails them out, with ether a direct bail out, or through loan and grant incentives.
Then the small business who already is not competitive based on economies of scale, is forced to fight that much harder to stay in the game. Of course it is that fortitude and determination of a small business owner that creates a growing business in a down economy.
Haha…so true.
Generally small businesses fill a niche left vulnerable by big business. Something big business can’t do because of overhead. For lack of a better term, it’s the Achilles heal of big business.
I once worked for a private edible oils firm. We couldn’t compete the the Cargills and ADMs for the business that the Pillsburys and General Foods needed in commodity lines. But we did business with those firms in niche areas. And made nice margins. And we sold commodity oils to smaller firms that were overlooked by the larger firms.
No business in it’s right mind in today’s world adds people for the sake of adding people. Most businesses, large or small, simply don’t have have the margins to do that. Of course there are exceptions,
And there are loans and grants and other special situations for small businesses too. They just aren’t headlined like the bailouts are. And many large corporations and government entities have set asides for small businesses. And it’s not limited to just minority set asides.
To answer your question, of course not. I hate to be a bit cynical, but I believe some of our elected officials are taking advantage of the public’s perception that “big business” is bad and “too powerful.” And this is a real perception as documented by Gallup in numerous recent polls. Coupling that with the perception of rich people being greedy, you have an argument for regulating business even more and increasing taxes on the wealthy to support an agenda, regardless of how well-intentioned it is. It’s classic tactical PR – capitalize on the mood and perception of the day to insert your message to achieve the desired effect. The thing is the second most “trusted” institution in the country is small business behind the military. While difficult to do, the argument has to be made that increasing taxes on the wealthy and business in general is increasing the tax burden on small business owners. As you’ve pointed out, this will not motivate business to free up capital, produce widgets/services and create jobs, driving economic impact. However, it does increase tax revenue to pay for an ever expanding suite of government services that millions of people are dependent upon. It’s a tricky and tough situation. The answer is not to tax the wealthy and the answer is not to stop funding services….as millions of people will be hung out to dry and that’s not responsible or extending grace to people. The answer is long-term and will be arrived at in a mix of changes that involve taxes, service level changes, budget reduction, deficit reduction and other reform measures. The answer is not push-button.
Ohhhh snap!
Chris,
Thank you for posting this information. I heard it on Sept 30 during the EntreLeadership live simulcast and wanted the information to share with my colleagues. As someone in management in the Fortune 50 world I see everyday the pressures to cut costs and the impact to long term employment. I really feel it is time to work on my corporate exit plan and go make a difference in the small business/private world! Keep on spreading the word.
Wow! Glad I could help!!
Steve, be sure to read Quitter before jumping ship! (Jon Acuff probably wasn’t even born when I went out on my own. . . sigh) I hope you keep commenting here and report in when your exit plan is in place. It is so encouraging to read about people reaching their goals, and I wish you great success.
Thanks for the encouragement. I’ll go buy the book today.
Chris,
Thank you for the sensible comments. The media love to get caught up reporting the politics of greed stories but they never seem to be able to get behind the headline numbers and see what the real consequences would be. We have the same disease in our country.
Keep up the good work.
Thanks!!
Thanks for sharing your thoughts on this Chris. I agree with you wholeheartedly. In fact, I wish I could shake your hand! It seems that many people are hurting the very ones that are helping our economy right now.
You’re right on!
while I agree with your blog and the comments, it makes me sick when I see the CEO for anthem bcbs makes 44 million per year. Who is worth that? College football coaches make millions per year while the teachers live on starvation wages. Somethings is really wrong here. I’m glad to see the facts on the small businesses, that’s awesome.
No they should not..I wish everybody looked at this issues the same way as you do, maybe it would help the government realiase that small businesses are driving the economy, and they should be getting tax breaks so they can keep hiring.
If only.
I think the key to any economy’s prosperity is to encourage entrepreneurism and small & medium scale enterprises. I see this things happening in emerging economies.
In many instances, I also see large business houses enjoying so many tax soaps, exemptions and subsidization of land banks which are not available to the vast majority.
And my answer to your question is NO, NO and NO! Small businesses should not be penalized for issues flowing from the big guys. Period – end of story. (I hope)
Haha…me too!