Government and Business Exist in a Symbiotic Relationship - Granite Grok

Government and Business Exist in a Symbiotic Relationship

Government and business

If he sticks to his campaign promises Biden will soon pursue huge tax increases on top earners. It is yet to be seen how helpful a near even division in Congress will be to turning his vow into law.

It is more certain what the Leftists of Silicon Valley will tell the new president. Some will undoubtedly encourage the hikes. It’s not unreasonable to speculate that Zuckerberg would be good with increasing taxes. He likely means what he has said. He’s a brilliant tech mind but naïve all the same in other ways.

Tax rates don’t factor into Zuckerberg’s decisions about how much or how little to work. He and his family are financially secure. His company is large and sits in a monopoly position. He can afford to appear gracious without it causing him any personal discomfort.

Does anyone think the tax increases enacted in 1993 under Bill Clinton factored much into Jeff Bezos’s decision to start Amazon in 1995? It’s unlikely, making it not unreasonable to suggest tax policy does not alter Bezos’s work ethic. But work ethic and ability do not have equal distribution in society; do they.

Tax rates

Tax rates do have an impact. Monopoly players pass the tax increases on to their trapped customers. The result is you are going to pay for their egalitarian whimsy. Better yet for them, their competitors are non-monopolies. Their competitors feel more impact from tax hikes than they do. They are much less in control of pricing.

Taxes are an unfortunate price or penalty placed on work. Willingness to put in long hours among the seriously entrepreneurial is innate. Their drive dwarfs that of the typical person. Their willingness to take on risk is both exhilarating and at the same time terrifying. Entrepreneurs stare bankruptcy in the face on a daily basis. It is part of bringing life to their visions.

Being driven, they generally don’t have time to lament tax code impediments which they cannot control. That does not mean  income tax rates don’t matter much to them. Especially early in a business’s life every dollar counts and every dollar has a destination. What goes to government is not available to the business. That translates to slower growth, lost opportunities and greater risk.

Will the enterprising who support Biden dismiss the negative impact of higher rates of taxation? They might. They’re “cool” about more taxes. That can come from being excessive devotio9n to their visions to care about taxation. Though that does not comport with my interactions with them. It may also reflect the fact their compensation isn’t from income.

Requirements of growing business

It’s what Biden’s bankrollers won’t tell him that matters most. Tax cuts aren’t just about work incentives. Entrepreneurs can’t innovate without capital. No economic school of thought can evade this simple truth. Entrepreneurial concepts are just concepts without investment. This is why tax rates matter a great deal to innovative endeavor. Government and business exist in a symbiotic relationship.

Working capital in a company’s early days is always incredibly difficult to come by. Entrepreneurs spend most of every day thinking about liquidity and talking about liquidity. They look to the heavens and plead for liquidity (money available to invest). Entrepreneurs are in a constant struggle for always limited capital. They do not always win.

There will be many in Silicon Valley who don’t recoil from higher tax rates. But… they’re leaving out how essential access to capital is. This is where the importance of low income tax rates on the highest earners comes in. Capital availability is directly variable with rate of taxation on those with the most.

That is true because the rich are the most likely to have unspent wealth left after meeting their consumptive needs. When their excess isn’t subject to  high tax rates they save or invest it. A growing capital base is the friend of those with abundant vision. Every dollar that isn’t nailed down is plowing directly into the business. You see those with money want a return on their saved or invested capital. They undertake risk to get it.

Killing the goose who lays the golden eggs

The more investment that’s available, the better the odds are for startups. The more that wealth is taxed, the more that what’s left over has to be put to work more carefully. This accrues to the harm of those with vision, drive and solid products and service offerings. Government and business exist in a symbiotic relationship.

Looking ahead the hope is Congress will prove an insurmountable barrier to Biden’s taxation vision. If that fails,  moving forward, American prosperity will incur damage . It’s useful to remember; tax increases are much more than a work disincentive. Their worst quality is they limit the process whereby the energetic with vision are able to acquire capital to make their vision a reality.