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How Big Government Shafts Small Companies

A recent Gallup poll says that more Americans are afraid of 'big government' than 'big business.' Small businesses should be afraid of both.
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A recent Gallup poll revealed that two-thirds of Americans fear of “big government” while a little more than a quarter of Americans fear “big business.”  What’s funny about that statistic, IMHO, is that the question suggests that there’s a fundamental difference between the two.

Asking an average citizen to differentiate between “big government” and “big business” is like asking a toddler watching a puppet show whether the puppets are talking or whether it’s the puppeteers.

For small businesses, what’s really scary is the unholy alliance between “big government” and “big business.”

While politicians of both parties give plenty of lip service to helping small businesses, “big government” (or even “small government,” for that matter) seems committed to giving “big business” a competitive advantage.

Here are my top five examples:

1. Unlimited Corporate Campaign Contributions

In theory, small companies as well as big ones can throw money at the political process.  However, the typical small business is usually too concerned with its own expenses to buy off anyone more important than a local congressman. And because the big multinationals have the deep pockets, smaller firms end up with little or no political power.  While it’s true that smaller firms can band together to form lobbying organizations, such groups lack clout compared to the huge companies that dominate the legislative agenda.

2. High (but Avoidable) Business Tax Rates

While it’s true that the U.S. business tax rates are among the highest in the world, there are so many breaks available to large businesses that the actual tax rate (for the big guys, at least) is often nominal. The only companies that end up paying the full rate are the small businesses that can’t afford to hire a crowd of accountants to squirrel away money overseas or pay politicians to enact preferential tax breaks.

Small business owners may dream about the day that they’ll be able to game the system too, but while they’re still small fry, the current system remains toxic.

3. Health Insurance Status Quo

The U.S. health care system (both today and under Obamacare) is skewed to favor large group insurance, while smaller groups and individuals end up paying far more. Combine this with the inefficiencies of a disjoint health-care delivery system (itself dominated by huge companies), and small businesses are kept at a perpetual disadvantage in keeping their workforce healthy and productive.

While our government would probably screw it up if they tried to implement universal public health insurance (as in Canada or France), it would definitely create a more level playing field between big companies and smaller firms.

4. Free Trade–but Restricted Immigration

Free trade creates jobs … wherever labor is cheap.  Large companies have more infrastructure to make outsourcing profitable, while smaller businesses are often dependent upon local labor. Meanwhile, immigration restrictions make it more difficult to import the cheap labor that would be competitive with overseas operations; for an example, see the debacle now taking place in Alabama after the enactment of a draconian immigration law.

One could argue that immigrants (illegal or otherwise) take jobs away from U.S. citizens, but if those jobs will be shipped overseas anyway (to benefit huge firms), that’s a moot point.  The question is: What’s best for small business?  Not the current situation, certainly.

5. Regulations That Disproportionately Hurt Small Business

Big corporations generally have enough government clout to ensure that any “anti-business” regulation ends up working to their eventual advantage.  A perfect example is Sarbanes Oxley, originally enacted in the wake of the Enron scandal to keep big companies from fudging their numbers. But the burden of the extra accounting, while trivial to a big firm, is enormous to small business. As a result, it’s now harder for small businesses to go public but easier for them to be acquired—at a lower price than they’d command if the IPO exit strategy had remained more viable.

Readers: What do you think?

IMAGE: image courtesy flickr user vgm8383 http://www.flickr.com/photos/vgm8383/
Last updated: Dec 22, 2011

GEOFFREY JAMES

Geoffrey James, a contributing editor for Inc.com, is an author, speaker, and award-winning blogger. Originally a system architect, brand manager, and industry analyst inside two Fortune 100 companies, he's interviewed more than a thousand successful executives, managers, entrepreneurs, and gurus to discover how business really works. His most recent book is Business Without the Bullsh*t: 49 Secrets and Shortcuts You Need to Know. If you enjoyed this post, sign up for the free weekly Sales Source newsletter.




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