In this blog post about Small Business and Income Tax, Megan McArdle explains that ‘we’ [presumably meaning the government] need to raise taxes:
So I end up thinking that it [tax increases] will effect small business, that I’m very sorry about that, but that we need to go ahead and raise the taxes anyway. I feel the same about taxes on the middle class.
…we need money to cover promises we shouldn’t have made decades ago. The current structure of our federal budget isn’t sustainable, which means we’ll all have to learn to get by on a little less–including small business owners, and the people they employ.
Two questions for Megan:
- What if raising taxes on small business and the middle class reduces the net present value of the value of the money needed to “cover promises we [again with the we?] shouldn’t have made decades ago”?
- Have you considered lowering government spending?
Earlier in the blog post, Megan expresses doubt that small business is the job growth engine Republicans claim it to be:
…Republicans… have been…exaggerating the extent to which the average small business creates jobs (job growth is mostly concentrated in a handful of fast-growing ones that don’t stay small).
While it’s not entirely clear why Megan included that remark, the only reason I can think to include it is that she thinks this concentration, if it exists, matters.
Is she reasoning that not all small businesses matter that much for job growth, just those that are growing fast?
If so, I disagree. It’s hard to predict which small businesses will not “stay small.” Read The Black Swan. We wouldn’t do ourselves any favors by hampering small businesses. We should be happy with as many small business experiments as we can get. Only a small percentage will grow big. Reduce the number of small business experiments and you may reduce the number of those that grow big.
Even without the “grow big” argument, I see no reason to hamper small business. Small businesses employ significant numbers of people and they make our lives better through the products and services they offer us.
It is a bit frustrating when I see someone like Megan, who admitted on an EconTalk podcast about her struggles to manage her personal finances (i.e. make tough choices), who wants to force tough choices on others because she thinks its the right thing to do.
It’s even more frustrating when someone like her makes such suggestions without considering that she might not have thought it through well enough and thought through other options, like cutting government spending.
UPDATE: At least in this post, Megan thinks that small businesses that don’t grow large have value.