I’m glad that Texans seem to know their economics. I’ve had quite a few recent discussions with fellow Texans who seem to understand that higher taxes lead to lower employment and lower opportunities for all. While it sounds nice to take from the rich and give to the poor, the sad reality is that such a policy will impoverish us all over time as the rich find ways to circumvent the system.
According to the Small Business Administration (here), small businesses “represent 99.7 percent of all employer firms, employ about half of all private sector employees, and have generated sixty (60) to eighty (80) percent of net new jobs annually over the last decade.” Small businesses are the lifeblood of our economy.
So, what if we require these small firms to incur the burden of paying mandated health benefits? My guess is that the costs will have to be absorbed and less employment will ultimately occur in the future. What if we want to increase the tax burden on entrepreneurs who earn over a certain amount, say $250,000.00? Well, these people may have to make their tax payments out of payroll, which can either result in lower employment opportunities for those seeking work or the loss of small businesses.
All taxes, whether they be in the form of mandatory compliance or actual cash, create negative incentives to productivity. In the short run, the taxing authority may earn more revenue; however, in the long run, higher taxation will lead to less overall revenue and will succeed in drying up the pool of entrepreneurship in the area being taxed. It becomes a tale of “heads I lose, tails I lose.” If the entrepreneur’s business fails, he loses; if his business succeeds, he loses to taxes.
What sort of incentives do we really need running through our economy. If we want our country to continue to prosper, then we need to read our economic text books and make decisions that create positive incentives.