John H. Field: Economy would grow with return to 1925 attitude
In 1925, then President Calvin Coolidge famously declared: "The chief business of America is business."
CHARLESTON, W.Va. -- In 1925, then President Calvin Coolidge famously declared: "The chief business of America is business." Since this nation emerged from the political control of Britain, the freedom of individuals to build their own futures has made business the engine for economic growth and prosperity that has been (and still is!) the envy of the world. It is the magnet that has attracted ambitious and enterprising immigrants from all nations who see this freedom as an opportunity to fulfill their dreams.
The public image of business, as a force for good, has deteriorated from this high standing in 1925 into a reputation today tarnished by too many examples of high profile but badly managed big businesses (Enron, WorldCom, General Motors, Countrywide Finance, et al.). It's not generally recognized that about half of the U.S. private sector Gross Domestic Product is provided by businesses with fewer than 500 employees.
The result, predictably, is more regulatory legislation and growing involvement of governments in the businesses of America. The track record of governments in business has been one of consistent failure. With rare exceptions, governments make bad business decisions simply because they are politicians with little (if any) business experience, and all of whom are politically motivated and heavily lobbied by narrow and special interests. Governments should be getting less, not more, involved America's businesses.
Notwithstanding examples of bad management (that should be allowed to fail and disappear), business is not the enemy. Instead, all levels of government should broadly support and encourage businesses and defend them worldwide. Business should still be "the chief business of America" as it is the only reliable engine for growth and prosperity throughout the world. Businesses must not be seen to be merely wellsprings of cash to be tapped at will by governments. But that is precisely what's happening. It's time to speak up for business and for the public to educate itself on this subject.
Consider the basic structure of businesses. A business is born whenever one or more individuals perceive that their ability to meet a need or want of their own has become an opportunity to provide a product or service for which others will pay an acceptable price. As businesses mature, there are five principal stakeholders:
Owners, typically through a Board of Directors, are responsible for the strategic direction and objectives of the company, policies governing operations, and employment and compensation of key management personnel. Owners are rewarded with a share of earnings (dividends) and growth of the value of their capital contributions (capital gains). And they pay income taxes on both. Employees, including management personnel, are individuals with essential technical and professional skills, and those with a variety of operating skills. In many businesses, employees are also shareholding "owners". All contribute their labor as well as skills. Compensation (salaries, bonuses and benefits) varies according the financial success of the business and the necessity to be competitive with employees' alternative employment options. Suppliers of products and services to businesses collectively add employment (for large companies, this multiplier factor runs 10 to 15 times the number of employees of the business).
Compensation of employees of both the business and its suppliers is subject to income and payroll (Social Security/Medicare) taxes. Income and payroll taxes paid by public and private owners and employees contributed 45.4 percent and 35.7 percent respectively of total federal revenues in 2008.
Communities, broadly, includes all levels of government, but especially local. All benefit from employment of their citizens. Employees of both the business and its suppliers pay income and payroll taxes individually, plus sales, real estate, personal property and school and other local taxes. The businesses also pay all of these taxes, plus health insurance for employees, unemployment compensation tax and workers' compensation insurance premiums, as do suppliers. In addition, host communities rightfully expect and require businesses to be respectful of their environment, and to be good citizens who support community goals, plans and needs. In 2009, U.S. corporations also provided charitable contributions of $14.1 billion. The Customer is king in all businesses and ultimately is the source of all business revenues. Businesses that do not consistently provide products and services to customers with superior quality and competitive pricing will not endure. The customer pays sales taxes in most states for its purchases from businesses, as does the business, for its purchases from suppliers.
Little wonder private businesses, and particularly small, innovative new businesses, are called the "geese that lay the golden eggs" that are the lifeblood of our economy. What possible justification can there be to add onto the cost structure of businesses yet another layer of state and federal income taxes on business earnings? From which constituent of the businesses should these properly labeled "double taxes" be extracted? Every dollar of additional tax on a business is a dollar not available for the company to maintain, grow and expand its business, or to increase its compensation to investors and employees, or to add value to customers' purchases.
By 2011, America's businesses will be assessed the highest taxes (marginal rate of 39.6 percent federal, plus state) on business income in the world. Why wouldn't U.S. business owners reasonably consider transferring their businesses to other locations with more business friendly tax policies? Or worse yet, give it up as not worth the effort?
Anyone with a genuine interest in expanding the growth of U.S. GDP, and at the same time expanding employment and productivity, must know that the real stimulus needed, and the only one that will work, is to go back to 1925 and make "business the chief business of America". We must stop killing the "geese that are laying the golden eggs" by siphoning off the earnings of businesses to fund other government spending. National security, economic stability and the dignity of gainful employment can be achieved long term only by refocusing national policy on encouragement of entrepreneurship, private business growth, measured but minimized government regulation, and international competitiveness of the nation's businesses.
It's a simple formula: Remove all government "double taxes" on business earnings. Then stand back and, along with the rest of the world, be amazed by the rebirth of business and employment in America. Revenues lost by eliminating this tax (that contributed only 12 percent of the federal total in 2008) will be more than offset by growth of taxes paid by stakeholders of the businesses.
Field was a Union Carbide executive in South Charleston, then became a senior vice president of Union Carbide Corp. He is retired and lives in Connecticut.
CHARLESTON, W.Va. -- In 1925, then President Calvin Coolidge famously declared: "The chief business of America is business." Since this nation emerged from the political control of Britain, the freedom of individuals to build their own futures has made business the engine for economic growth and prosperity that has been (and still is!) the envy of the world. It is the magnet that has attracted ambitious and enterprising immigrants from all nations who see this freedom as an opportunity to fulfill their dreams.
The public image of business, as a force for good, has deteriorated from this high standing in 1925 into a reputation today tarnished by too many examples of high profile but badly managed big businesses (Enron, WorldCom, General Motors, Countrywide Finance, et al.). It's not generally recognized that about half of the U.S. private sector Gross Domestic Product is provided by businesses with fewer than 500 employees.
The result, predictably, is more regulatory legislation and growing involvement of governments in the businesses of America. The track record of governments in business has been one of consistent failure. With rare exceptions, governments make bad business decisions simply because they are politicians with little (if any) business experience, and all of whom are politically motivated and heavily lobbied by narrow and special interests. Governments should be getting less, not more, involved America's businesses.
Notwithstanding examples of bad management (that should be allowed to fail and disappear), business is not the enemy. Instead, all levels of government should broadly support and encourage businesses and defend them worldwide. Business should still be "the chief business of America" as it is the only reliable engine for growth and prosperity throughout the world. Businesses must not be seen to be merely wellsprings of cash to be tapped at will by governments. But that is precisely what's happening. It's time to speak up for business and for the public to educate itself on this subject.
Consider the basic structure of businesses. A business is born whenever one or more individuals perceive that their ability to meet a need or want of their own has become an opportunity to provide a product or service for which others will pay an acceptable price. As businesses mature, there are five principal stakeholders:
Owners, typically through a Board of Directors, are responsible for the strategic direction and objectives of the company, policies governing operations, and employment and compensation of key management personnel. Owners are rewarded with a share of earnings (dividends) and growth of the value of their capital contributions (capital gains). And they pay income taxes on both. Employees, including management personnel, are individuals with essential technical and professional skills, and those with a variety of operating skills. In many businesses, employees are also shareholding "owners". All contribute their labor as well as skills. Compensation (salaries, bonuses and benefits) varies according the financial success of the business and the necessity to be competitive with employees' alternative employment options. Suppliers of products and services to businesses collectively add employment (for large companies, this multiplier factor runs 10 to 15 times the number of employees of the business).Compensation of employees of both the business and its suppliers is subject to income and payroll (Social Security/Medicare) taxes. Income and payroll taxes paid by public and private owners and employees contributed 45.4 percent and 35.7 percent respectively of total federal revenues in 2008.
Communities, broadly, includes all levels of government, but especially local. All benefit from employment of their citizens. Employees of both the business and its suppliers pay income and payroll taxes individually, plus sales, real estate, personal property and school and other local taxes. The businesses also pay all of these taxes, plus health insurance for employees, unemployment compensation tax and workers' compensation insurance premiums, as do suppliers. In addition, host communities rightfully expect and require businesses to be respectful of their environment, and to be good citizens who support community goals, plans and needs. In 2009, U.S. corporations also provided charitable contributions of $14.1 billion. The Customer is king in all businesses and ultimately is the source of all business revenues. Businesses that do not consistently provide products and services to customers with superior quality and competitive pricing will not endure. The customer pays sales taxes in most states for its purchases from businesses, as does the business, for its purchases from suppliers.Little wonder private businesses, and particularly small, innovative new businesses, are called the "geese that lay the golden eggs" that are the lifeblood of our economy. What possible justification can there be to add onto the cost structure of businesses yet another layer of state and federal income taxes on business earnings? From which constituent of the businesses should these properly labeled "double taxes" be extracted? Every dollar of additional tax on a business is a dollar not available for the company to maintain, grow and expand its business, or to increase its compensation to investors and employees, or to add value to customers' purchases.
By 2011, America's businesses will be assessed the highest taxes (marginal rate of 39.6 percent federal, plus state) on business income in the world. Why wouldn't U.S. business owners reasonably consider transferring their businesses to other locations with more business friendly tax policies? Or worse yet, give it up as not worth the effort?
Anyone with a genuine interest in expanding the growth of U.S. GDP, and at the same time expanding employment and productivity, must know that the real stimulus needed, and the only one that will work, is to go back to 1925 and make "business the chief business of America". We must stop killing the "geese that are laying the golden eggs" by siphoning off the earnings of businesses to fund other government spending. National security, economic stability and the dignity of gainful employment can be achieved long term only by refocusing national policy on encouragement of entrepreneurship, private business growth, measured but minimized government regulation, and international competitiveness of the nation's businesses.
It's a simple formula: Remove all government "double taxes" on business earnings. Then stand back and, along with the rest of the world, be amazed by the rebirth of business and employment in America. Revenues lost by eliminating this tax (that contributed only 12 percent of the federal total in 2008) will be more than offset by growth of taxes paid by stakeholders of the businesses.
Field was a Union Carbide executive in South Charleston, then became a senior vice president of Union Carbide Corp. He is retired and lives in Connecticut.
