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Free Enterprise Mustn't be Free

Knowledge and hard work are rewarded, not subsidized

Every Sunday I look forward to reading the "Five Myths" column in the Washington Post.  Some are provocative and some are yawners, but last week's entry makes me want to blog. In "Five Myths about Free Enterprise", Arthur Brooks – president of the American Enterprise Institute – is sometimes overwrought and over the top.  But a few points from Mr. Brooks really hit home.

"Find me an opportunistic politician chumming the waters with tax loopholes, and I’ll show you a corporate shark."  Ever wonder why the tax code is so convoluted and biased?  Because Congress knuckles under to companies and individuals with influence looking for a competitive and economic edge.  Instead Congress must turn a deaf ear to those pleas, serving the broader interests of consumers and the free market by eschewing favoritism and showing some backbone.

"We need more free enterprise, not less — free enterprise where entrepreneurs put their money on the line and earn a profit or suffer a loss."  It is not government's place to promote a specific type of business or industry. Similarly, it's not government role to guarantee a profit on any endeavor.

"For a majority of Americans, fairness means not redistribution, but rewarding merit — and that is what free enterprise does."  At the same time, it's not the government's place to deter or restrain free enterprises that some politicians may deem unworthy or frivolous.  Government must ensure that the marketplace is competitive and that competitors bear the full cost of their economic activities.

Here are my suggestions for maintaining a strong and fair business environment:

  • Free companies from government subsidy or hindrance.  The World Bank ranks U.S. #4 in ease of doing business but #72 in ease of paying taxes.  My income tax proposal removes the burden of tax from companies and places it where it belongs:  fully on the shoulders of owners and shareholders.
  • Get government out of running and influencing companies – whether at the national, state, or local level.  Virginia ABC, Sallie Mae, Freddie Mac, and Fannie Mae all subject taxpayers to the risks of free enterprise while barring the private sector from participating.  The same goes for government charters and noncompetitive agreements:  just stop it.
  • Refocus government on provision of public services that may not have an immediate profit or return on investment.  These public goods make us all more prosperous by encouraging interstate and international commerce.
  • Stop subsidizing or hindering individual pursuits and purchases.  Housing – for example – is subsidized through the mortgage interest deduction and other preferences, distorting consumer choice between owning and renting, increasing the cost of housing, and increasing the possibility of a bursting asset bubble.

 

Risk isn't free:  sometimes you gain by taking a chance, sometimes you don't.  Taking a chance in business may yield a profit or a loss.  Those that merit success – through knowledge, hard work, and perhaps luck – will profit.  Those that don't, lose.  But it's not the government's place to subsidize a profit or cushion the blow of a loss.  That is the essence of a democratic economy.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Jim Daniels July 30, 2012 at 12:43 PM
You are pining for an America that has never existed. The closest we have come to this regulation free utopia was the late 19th - early 20th century...look how that turned out!. The United States has been using tax law to influence societal goals since the founding. We, as a society decide that lowering pollution is desirable, so we incentive the development of pollution control technologies. We as a society decide clean food is important, so we regulate the food industry. We as a society decide that advances in communication are important, so we subsidize the development of the internet and other research. There is nothing wrong with any of this..and is in fact one of the purposes of Government. I certainly agree that there are cases where subsidizing business is inappropriate, such as with oil companies, and big agra...but in many cases it is not only proper, but necessary. I also agree making the tax code simpler would be a good thing. We can start by removing the loopholes that allow the wealthiest 1% in this country to escape paying what their income would normally demand. As a former small business owner I can sympathize with how complicated it is to simply pay your taxes. But, there certainly must be a way to remove these difficulties, without removing the many benefits that occur when Government reflects societal goals by subsidizing the development of technologies or by providing the services we decide are needed to improve the quality of life for our citizens.
Mark Gibson July 31, 2012 at 02:18 PM
Jim: Thanks for reading the blog and posting a comment. Our points of view may not be as far away as they appear. I'm not suggesting the Wild West; regulation is a vital part of the free market to set and enforce the "rules of the game" and to provide information to buyers and sellers. We also agree that the tax code is full of bias and favoritism; for example, all income should be treated the same whether earned from labor or capital. Where we differ is the mechanism to achieve the goals of public goods and services. I believe the tax code should raise revenue – period. R&D, food safety, and the other services you mention are best provided, made transparent, and held accountable through the annual budget process. When ingrained in the tax code, "tax expenditures" tend to go on autopilot with little oversight and little end in sight. With regards to pollution, I think that effluent taxes are an efficient way to elicit a price response from producers to an externality with clear negative effects on the public and environment; it's also a good way to offset the cost of enforcement. Mark
Sally Spangler August 01, 2012 at 11:25 PM
Crooks? "Smart businessmen" who wiggle around the laws to make them go their way? That has been going on since business all over the world has been in the hands of the people who figured out how to beat the rules/laws to their own advantage. Check around - you will find that the big corporations, unnamed - have figured out how to continue their contracts with the government long past the original term of the contract as originally written. Wake up people! You are sleeping with your eyes wide open!

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