Wednesday, August 04, 2010

What The Left Misses

Ezra Klein ponders whether business owners hate taxes and regulation because they lean Republican or if they lean Republican because they hate taxes and regulation.

As you can see, business owners are the most Republican occupational group, while managers are hot on their heels. Workers trend more Democratic.

I don't want to explain that away too much. A lot of these folks are Republicans because they hate taxes and regulations, and they hate taxes and regulations because they believe them to be bad for their businesses. As you might expect, their Washington trade groups are even more conservative, and are single-minded in their determination to weaken regulations and cut taxes.

What gets difficult in all this is separating things that are actually hurting businesses from things that Republican-leaning business owners, for reasons of ideology or personal self-interest, simply don't like. And because there's virtually no data on this question, there's really no way to tell the two apart.

Unfortunately, there's no data on the subject, so I guess we'll never know. Or we could just use some common sense. My father's a small business owner and I've been involved in the business for over a decade. Technically, I'm a small business owner with my startup legal practice. And I can tell you from personal experience that every little tax and every regulation add to the costs and time of running a business. The idea that a business owner might be for higher taxes or more regulation if not for his or her political allegiances is just plain asinine. Business owners aren't casting ballots because of gay marriage, or because of wars in Iraq or Afganistan, or because of Barack Obama's birth certificate. Business owners care about their business because that's their livelihood and how they support their families. They lean republican because they're hoping for lower taxes and less regulation and you shouldn't need data to tell you that.

Ezra also asks the question of why businessmen are nervous about investing more in the current economic climate:

But the why of it is, well, complicated. Answers differ from one businessman to the next, and from one survey of businesses to the next. A lot of the answers are in tension with one another: They want to see the deficit brought down, and they also want the tax cuts extended. They need unemployment to come down, but they want to see Washington back off. They want health care to cost less, but they don't want government to touch it.

Ezra sees tension, but I see more common sense. Deficits and taxes could both be lowered through spending cuts, which, coincidentally, could all be accomplished through the dismantling of the regulatory state. And sure they want the economy to improve and health care costs to go down, but that doesn't mean they want Washington to do it. Even if you're of the mind that Washington could do something positive about unemployment and health care costs, that doesn't mean you'd be of the opinion that such fixes wouldn't impose additional costs on you as a business owner.

It doesn't take a genius to realize that massive regulatory expansions like the new health care bill have businesses terrified of expanding. Taxes are relatively straight forward things, but until regulations actually hit, it's difficult to near impossible to calculate the costs of compliance and this holds true for all taxes and regulation. And every business is different. That one business would find compliance relatively inexpensive does not mean that another business, even one in the same industry, would find compliance inexpensive. Government may have a top down approach, but businesses do things differently which is exactly why you get innovation in the free market system.


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