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Tropico Perspective

Tax incentives won't grow business or create jobs.

October 06, 2010|By Michael Teahan

With so much of the conversation in this election focused on what will make small businesses happy and motivated, I thought it might be valuable to get an entrepreneurial perspective. Not from a chamber of commerce lobbyist, talking head or rich chief executive who forgot what being a small business owner even means — but a real one.

I have been a business owner for all but three years of my adult life, as was my father, my mother, four uncles, two aunts and one cousin. Some preach small business. I bleed it.

First and most importantly; the profit motive is overrated.

Our motivation is not that different from anyone else's. Teachers aren't driven by a big payday and an ER nurse isn't likely to get a beach house in Malibu, but somehow they manage to make a career choice that isn't dictated by a profit motive. Those same forces drive small business.

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We make choices based on what we are good at and what holds our interest. Sometimes it is the challenge to succeed, not just in terms of money, but making something from nothing and the independence that it brings.

The point is that setting policies designed to merely increase profit does nothing. We need education, infrastructure, access to capital and customers with money to spend. We don't need a tax break to hire employees because we only pay taxes on the money we keep for ourselves. Profits we do invest in capital equipment we get back through depreciation, and under the new Obama proposal we get it back right away — a pretty sweet deal.

Tax cuts don't help businesses grow.

The guiding principal of the free market system is that companies succeed by being more competitive and delivering a service or product that attracts more customers than the other guy — kind of an economic Darwinism. A tax cut isn't a customer, never bought anything and doesn't have anything to do with all those reasons we started business in the first place.

Back when supply side economics was popular, about the time I got my degree in economics, I had lots of debates with the conservative policy wonks in Claremont where supply side economics was invented. It is amazing how many economists never ran a small business.

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