Catasauqua Press

Wednesday, January 16, 2019

Letters to the editor

Wednesday, December 20, 2017 by The Press in Opinion

Restoration of common-sense balance is needed in tax code

To the Editor:

I have been a small-business entrepreneur starting two successful, small manufacturing companies in the Lehigh Valley. During the 25-plus years of creating start-ups, taxes were never at the top of my list of concerns. I did not start nor grow my businesses based on decisions related to the tax code.

Do I like paying taxes? Not really. But here is the real truth: The successful growth or failure of a small business does not rely on the tax code. Business relies on one word: demand.

The common-sense question that one does not need a Ph.D. in economics to answer is, “If there is no demand for the products or services that I plan to provide, why start a company or invest in expanding?”

Demand accounts for roughly 70 percent of the U.S. economy. What creates demand? A community of consumers who have the financial means to buy products. If wages for the average worker are depressed, and the wealth of our society is transferred to the wealthiest via “tax cuts” like those currently in front of Congress, there will be no driver for demand.

Business people are not altruists. We invest in new equipment and/or staff salaries and their increases for only two reasons:

1) Demand increases

2) Cost of labor increases due to competition in the marketplace (i.e., demand)

Supply side economics or “trickle down” policies want the public to believe that we need to help the owners of capital be more profitable so they will invest. This narrative is out of step with economic common sense.

As a small-business owner, I had the occasion to inform our legislators that even if the tax code were changed, so I paid zero taxes and my cost of capital was reduced to zero, without increased demand for my products, why would I spend money on new equipment or staff if the demand for my products didn’t increase?

Just look at the experiment of Kansas Gov. Brownback’s attempt to apply supply side policy. It was such a disaster that Kansas conservatives had to pass a massive tax increase to overcome their failure to grow via tax cuts.

In Pennsylvania, when we applied for a low-interest loan, we were required to demonstrate the creation of a certain number of jobs to enjoy the low interest rate. There is a very simple solution to test the supply-siders. Require those companies taking advantage of the tax cuts to prove that they both created more full-time U.S. jobs and increased the wages of their nonmanagement staff. If they cannot prove the results, pay back the tax savings.

Do I believe that there needs to be improvements in the tax code for small businesses? Absolutely, but the priority now is on the demand side; after all, the business climate is currently thriving. It’s time the voting public realizes that there needs to be a restoration of common-sense balance in our tax code that promotes demand by improving the wages of the consuming worker.

Bob Elbich