Public Policy: What Does Business Really Want from Government?

Kellogg opts for choice two: market-based incentives . "The idea, in short," he says, "is to let government steer and the market row." Market-based incentives can be one of two types. Government could place a tax on pollution, and companies could pollute as much as they want to, consistent with their abilities to pay the tax. Government could reduce the amount of pollution simply by raising the tax rate. Alternatively, government could fix the total amount of pollution permissible and let polluters bid on pollution permits. The principal shortcoming of market-based incentives, according to Kellogg, is that there is still no way of knowing what the "right" amount of protection is and no way of deciding, except through the political process, where our priorities ought to be.

The free-market approach to regulation won't work, says Kellogg, and command-and-control regulation is "a relic of an earlier age (the 1960s and 1970s) when primitive information technologies seemed to require large bureaucracies to deal with complex problems. Today market-based solutions to our environmental problems seem clearly preferable."

WHAT SMALL-COMPANY OWNERS REALLY WANT: RESPECT

Fifteen years ago at the first White House Conference on Small Business (WHCSB), nearly 1,700 official delegates voted and said they wanted lower taxes, better access to capital, less expensive and less intrusive regulation, and government that was easier to do business with. Nine years ago at the second WHCSB, more than 1,800 delegates made very similar demands. This year, given the results of the state meetings already held, conference delegates will probably ask for lower taxes, better access to capital. ..

The problems the delegates see haven't changed much since 1980, and the solutions they've put forward haven't advanced much either. Fifteen years ago they voted, for instance, to support the Regulatory Flexibility Act, requiring federal agencies to review proposed regulations for their impact on small companies. This year they'll probably support a proposal that would allow small companies to sue agencies that don't perform the required review. Delegates aren't encouraged to color outside the lines.

Are the conferences a waste? Paul Barr, a Dairy Queen franchisor in Chester County, Penn., thinks so. He came home discouraged from the 1986 conference. "The amount of time we spent there," he says, "it was all for what? I expected too much."

But it's not the immediately measurable effects that are necessarily the most important. At the 1980 conference, with no precedent for such a gathering, few delegates had any expectations at all. Sixteen hundred and eighty-two official delegates arrived in Washington and were each astonished to discover that other people -- 1,681 of them -- shared their fears, insecurities, frustrations, and aspirations about small-company ownership. That first Washington meeting was a small-business Woodstock without the mud, a Stonewall without the cops.

A hugely charismatic chief counsel for advocacy at the SBA then, Milton Stewart, seemed to be everywhere at once, goading and cheerleading. "The significance of 1980 was that different segments of small business recognized that they had much more in common than they realized," says Ann Eskesen, president of Innovation Development Institute in Swampscott, Mass., and a delegate to the conference. "The impact was extraordinary."

The lasting effect of that meeting was to sharpen the political focus of the small-business community. The delegates created a follow-up organization that was short-lived, but it lit a fire under the professionals. "They don't need a new lobby," complained a lobbyist with the National Federation of Independent Business after the January 1980 event. "We've got the power to get their needs taken care of."

"Then why haven't you done it already?" sniped a Mississippi delegate.

Memo to this year's conferees: "Do your homework, understand the issues, and raise the profile of what you're doing," recommends two-time delegate Bill Nourse of Nashville, Tenn. Nourse knows it's easy to get seduced in Washington because those in the know there say what visitors want to hear. Be bold and bear in mind who's supposed to be listening to whom.

OUR COSTLY INCOME-TAX SYSTEM

Every time Washington collects a dollar in tax revenues, taxpayers shell out that dollar plus another 65 cents. Why is that? It's not that the IRS is inefficient.

That agency's expenses eat up less than a penny of each dollar it raises. The 65 cents is what it costs taxpayers -- businesses and individuals -- to pony up each dollar. Compliance costs, which come to 24 cents, include the expense of keeping records, staying current with the tax code, and filling out the forms. Enforcement costs, close to 2 cents, include tax-?payers' expense for audits and litigation. We spend 3 cents on tax evasion and avoidance. However, the biggest expense item, at 33 cents, is economic disincentive. "By taking away the fruits of labor and capital," says political economist James L. Payne in his book Costly Returns, "the tax system works to discourage working and investing." So the next time Washington announces a, say, $10-billion program, remember that the real cost is that plus 65 cents per dollar -- or $6.5 billion more.

Costs of the Federal Tax System to Taxpayers for Every Dollar of Revenues Collected

Source: Costly Returns, by James L. Payne (ICS Press, San Francisco, 1993).