QotD: Taxation and Regulation

To begin with, you must understand clearly that all taxation is regressive. It's all about proportion. Just as, say, a nickel sales tax on hamburger bites deeper into the economic flesh of the poor than into the relative adipose of the rich, so smaller companies are always hit harder by taxes than big companies with a better-padded bottom line.

Moreover (and this is a very important key to understanding what happened and why) big companies can afford bigger, slicker legal and accounting departments to save the corporation tax money or get them out of tax trouble if necessary. If government decides to go after a big corporation, its officers are far likelier to get their backsides forcibly removed and handed to them in court. (Or said officers may just be offered lucrative salaries to leave government and join the corporation.) Simply from an institutional standpoint, then, it's easier and safer to go after Mom and Pop, who are likely to be stuck with their brother-in-law accountant and the lawyer who drew up their wills.

Possibly even more important, all regulation is regressive, too. It costs a small company a much greater fraction of its assets to comply with government's dictates — most of them unconstitutional — than it does a big corporation with its teeming hordes of office drones.

I saw a dramatic display once of a quarter's worth of paperwork that the government required of the 3M corporation. The cardboard boxes it filled formed a sort of meandering garden wall about hip high and fifty or sixty feet long. It was truly horrific, and fundamentally wrong.

But my point here is that 3M could afford the resources (about a third of their overhead, they estimated) to deal with this kind and degree of asininity, whereas similar requirements, loaded onto the already breaking backs of small or even middle-sized companies could easily crush or kill them. At about the same time (the late 1960s), it was noted that four out of five new businesses go belly-up within a year.

And who, we may now ask rhetorically, do we thank for that? The same "progressives" today who shake their little Marxoid fistlets at Wal-Mart and bemoan the passing of the neighborhood grocery store. The same wasters who polluted the economic environment with regulatory toxins until the smaller denizens of the market were unable to survive and the only organisms left were the dinosauroid giants they love to hate.

L. Neil Smith, "'Progressives' or 'Regressives'?", Libertarian Enterprise, 2007-08-19