The government is waging war on small businesses

The COVID nightmare started in March 2020 when politicians and experts told us we needed to shut down the economy for three weeks in order to “flatten the curve”. Weeks turned into months as the goal post moved from “flattening the curve” to “no new cases.” Then, two months turned into half a year as the target post moved again from “no new cases” to “once we get a vaccine.” Now, six months is over a year as the target post has once again moved on to “vaccinate everyone”.

Even though 10 million people remain unemployed, small business owners have borne the brunt of this nightmare. The insurance policies were so bad for them that it’s hard to believe they weren’t specifically targeted. States made all kinds of exceptions for “core” companies, but the lion’s share of “non-core” companies were small businesses. As a result, more than a quarter of it nationwide closed permanently. This is no small feat, since small businesses, collectively, employ nearly half of all American workers.

And for those small businesses that have already managed to stay afloat, they may soon have to deal with the IRS. In a display of noticeable deafness, the IRS announced in November that it intends to increase small business audits by 50% next year. Let this sink in for a moment: In a year in which 25% of small businesses went bankrupt, the IRS decided it needed to do more to ensure that small businesses paid adequate taxes. Regardless of whether it is justified, this comes across as more bullying in a bullying year.

President Joe Biden, not to be fired, has announced that he intends to push for an increase in the federal minimum wage to $15 an hour. While Biden claims it will lift 1.3 million workers out of poverty, the Congressional Budget Office has estimated that it will actually destroy 1.3 million jobs. Given that small companies have far fewer resources than large companies, and that large companies are likely to pay workers more anyway, the lion’s share of these 1.3 million jobs is likely to come – you guessed it – from small businesses that are retrenching or closing. .

And what about the small business owners who managed to survive the shutdown, the IRS scrutiny, and the minimum wage hike? Biden will make sure their kids think twice before becoming small business owners themselves when he takes one last pound of meat through his estate tax hike. Politicians evade the estate tax every time they want people to think they are “taxing the rich”. But the truth is, the estate tax is particularly tough on family businesses. The unemployed rich can afford legions of lawyers and accounts to find legal ways to beat the estate tax. Many family businesses avoid property taxes by deliberately not growing enough to move them. And those who usually have buildings, equipment, and machines worth on paper enough to trigger the tax but don’t have a lot of money. When children inherit these businesses, the IRS requires them to provide cash to pay the tax. This means selling the business, in whole or in part, to raise funds. So the estate tax has the effect of shrinking the number of family businesses, year after year. Biggest winner? Big companies pick up the pieces left behind.

None of this is intentional, but this is a cool relief for people who have to pay for a whole storm of misfortune and misguided policies. In times of crisis, people assume that the government is working to alleviate the suffering of the people. But from a small business perspective, it seems that the government’s goal in 2020 was to shoot the country at its collective metaphorical foot. So far, it looks like her plan for 2021 is to shoot the other.


Anthony Davies is Associate Professor of Economics at Duquesne University. James R. Harrigan is the managing director of the Center for the Philosophy of Liberty at the University of Arizona. They host the weekly Words and Numbers podcast. This column was provided by InsideSources.

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