16 SMALL BUSINESS
This is how Government should promote small business. Government should have a simple policy that assures people that if they take the risk of investing in a business, they should first get back, without it being taxed, the money that they have risked. Only then should Government take its tax from any excess over the amount that has been put at rick, that the investors receive. It has been proven that a large proportion of business start up end in failure or bankruptcy. It also been seen that many successful entrepreneurs have failed in one or more of ventures that they have tried. One of the main reasons for those failures is that income taxes have been paid on unrealized profits tied up in work in process, inventory and other business outlays.
Government seems to think that it helps small business for the taxpayers to pay for programs, run by bureaucrats, to help entrepreneurs and small business. I remember a client saying to me “Please, not another program to help small business, if they help us any more, we will be out of business”. What government can really do is do away with regulations that cost small business time and money. They can also stop taking away money from small business needed to make their businesses grow. Small business is taxed on money that they have not received or on things needed by the business that has paid out. Small business is taxed on money owed to them for things they have made or bought and then sold, but for which they have not received payment. Small business is taxed on things that they must purchase like supplies, raw materials, new equipment that they have on hand. Small business must even pay tax on the wages that they have paid their workers but whose products have not yet been paid for from their customers. It does not seem right that government should claim how great the economic growth resulting from small business is and yet restrict that growth by their tax policies.
Government sets up programs to help small business but they do more to distort the business environment than help. They pay big money to staff, that, if they have any business ability, would be better left to use their abilities to create businesses themselves.
Government has developed many programs to help the rich invest in a variety of businesses. Schemes that have resulted in the rich accumulating wealth by gambling in the stock market or the derivatives lotteries. But the very backbone of our country, small people and businesses, where Government should be providing encouragement, is taxed on money it never receives. Of course, it is big business and rich people who control our political parties.
All of these harmful taxation policies would be done away with if the tax base was changed from Income to Standard of Living (a graduated tax on consumption). With tax on consumption there only need to be one thing determined, was this money paid out for personal consumption or was it paid out to earn income. All money received must now be recorded and reported, as it will remain in the future. If paid out for business supplies or wages, or even paid out to buy a business, there would be no tax due. If paid for personal use it would be. It is wrong to tax money before it is spent.
Think how much better it would be for small business, and the economy, if friends and neighbors could invest some of the money they save in a business they know, rather than with the stock market gamblers. Think what it would do in our local economies. The RRSP scheme might be just another scheme to fill the pockets of the paper pushers in their towers.