Which do you Prefer? Profit-Oriented Business or Tax-Reliant Government?
From The Orange County Register
Orange Punch readers may have a little more time over the weekend, so we offer this slightly-longer-than-usual blog post on a question dear to everyone’s heart:
Which is better, profit-oriented private business or tax-reliant government?
Let’s say you have a business that you run economically, without waste or extravagance, permitting you to employ 10 people and to make a 3-percent profit, after expenses and taxes.
Now let’s say the government decides to increase your corporate tax from 9 percent to 10 percent. Just a little increase.
Where will you get the money to pay that tax?
Unless you want to pay the increased tax out of your savings or by spending less on expenses like employee salaries, 1 percent more in taxes probably means about 1 percent less in profit, give or take a buck. Your 3-percent profit margin becomes 2-percent.
What’s the significance of that?
What is it that you do with your profit, anyway?
Some of your profit you may save, which pays you a little interest income and provides banks money to lend to other businesses that want to use the money to expand. Or the banks may lend it to consumers, who want to use it to buy stuff from companies like yours.
You may spend some of your profit on your own business to expand it, such as buying more equipment from other companies or improving facilities by hiring workmen or by opening another store or factory and employing two or three more people.
You could invest it in stocks or bonds, which would give other companies money to use to expand or to grow while perhaps increasing your initial amount into more over time.
Or you may use some of your profit to increase what you pay to your 10 existing employees, perhaps with a permanent pay raises or a one-time bonus, earning you their gratitude and perhaps motivating them to work even more efficiently and, therefore, profitably. You may spend some of it to pay for research and development of new products or services that you would like to offer, which would be another way for you to expand your business.
Essentially, your profit pays for growth. It expands the economy.
But if the government takes 1 percent more of your profit – remember it already was taking 9 percent – what does it do with the money?
Part of the money the government takes from your profit it gives to someone else who incidentally did nothing to earn it and produced nothing of value to exchange for it. Your money was just transferred from you, who earned it, to someone else, who didn’t, but only after the government took out a handling fee.
In this way, your profit taken in taxes pays for bureaucrats and welfare. And food stamps. Medical bills. Subsidies for housing, electricity, gas or other utilities.
Some of the money from your profit the government will use to pay its own employees, who provide services to you and to others. The fact that you may not want those services doesn’t matter. The fact that the government’s cost to provide those services is almost always higher than you would pay in the private sector for similar services also doesn’t matter. And the fact that the government has no incentive, such as a private company like yours has, to provide those services economically without waste also doesn’t matter.
If the government uses your money to provide services to you that you don’t want and wouldn’t buy if you had the choice, also doesn’t matter. Even if the government provides the services badly, such as being late, careless or rude, you don’t have the same options you would have if a private company were providing the services. With a private company, you would have the option not to pay for them and to shop elsewhere.
In the private sector, you could always shop for a better price. If a private provider delivered the services badly, late, carelessly or rudely, you could stop doing business with that company, which gives the company a great incentive to serve you well.
You don’t have any of those options when the government provides the service.
That means, the government providers with whom you can’t avoid doing business have far less reason to please you than does a private provider, who risks losing your business if you aren’t pleased.
Let’s recap.
When the government takes money from private companies in taxes, it takes away money that can be used to grow the economy.
When the government takes away that money in taxes, it uses it to pay for things you may not want, and cannot avoid paying for even when they are delivered to you badly. It has no competition for the services it provides, therefore it has no incentive to provide them economically and without waste, or to provide them in ways that please you because you are a captive market, unable to opt out of the transaction.
So, which is better, profit-oriented private business or tax-based government services?
Where would you prefer your profit be used?
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