WOODBURY, Minn. – When discussing the current fragile state of America, the topic of business often comes up. The problem with this discussion is the assumed conflation between the interests of Wall Street and Main Street. Most people are mistakenly led to believe that what is good for big business is good for small business. Nothing could be further from the truth. Small businesses and big businesses must be looked at through completely different lenses and, in fact, what is good for big business is almost never good for small business. The interests of Wall Street and Main Street are in inherent conflict and it is precisely this naïve conflation of small and big business interests (and our feeble understanding of these differences) that pollutes our ability, as a larger society, to have a sober conversation about what is truly in the best interests of our country. In a nutshell, small business can save America with help from newly elected President Donald Trump.
Here are six examples of actions newly elected President Donald Trump can take to stimulate small businesses in America and raise the personal fortunes (and overall quality of life) for the rest of America:
- Reduce the corporate tax rate for all businesses from 35% to 15% while simultaneously eliminating big business tax loopholes that currently allow major corporations to avoid paying their fair share of taxes. While reducing taxes eliminates tax revenue on the front end for all businesses; by comparison, an estimated savings of $90 billion dollars could be achieved by closing tax loopholes for big businesses on the back end. This levels the tax playing field for all businesses and offers a new incentive to bring high paying manufacturing jobs back to American soil. Loopholes for big businesses allow for an effective tax rate of 14% (a far cry from the 35% rate most people naively assume big businesses currently pay in taxes).
- Offer a tax incentive (the specific benefit needs to be vigorously debated) to patent new technology that leads to manufacturing in the United States. Small businesses produce 16.5 times more patents per employee than large companies. In 2015, the United States led the world in patents produced annually with 57,385. Innovation drives manufacturing and, ultimately, high paying manufacturing employment. How many more patents would we achieve with a patent-based tax incentive that stipulated manufacturing in the United States (essentially, prohibiting offshore manufacturing)? 100,000? 200,000? This would be interesting to see over the next several years.
- Require mandatory entrepreneurship education in public high schools and colleges that prepares new entrants to the workforce to seriously consider starting a small business. Small businesses outnumber large corporations be a factor of 1,162 to 1. Currently, there are 28 million small businesses in America that provide roughly 70% of all employment opportunities in the United States annually. The fact of the matter is large corporations offer much less employment opportunities than small businesses. As a society, we have a moral obligation to promote entrepreneurship over employment with large corporations.
- Regulate the size of big businesses by controlling the number of employees a big business can employ with a maximum ceiling of 5,000 employees. This not only promotes competition (which lowers the cost of products and services for consumers) but it also dramatically improves customer service. Currently, four out of five customers surveyed (approximately 80%) believe that small businesses put a much greater emphasis on customer service than large businesses. This cap also naturally limits the lobbying discretion a large business can afford as it relates to promoting reckless (pro big business) regulations. These regulations (written in support of big businesses) are designed (in part) to neuter competition by penalizing small businesses who would otherwise compete with those same large corporations.
- Eliminate federally guaranteed students loans. This forces colleges and universities to dramatically lower their tuition and overall costs. Without a guaranteed payday, these institutions of higher learning would be forced to compete in the open market. Tuition would drop like a rock falling out of the sky and students would be removed from the burden of graduating with a $150,000 (or more) of student loan debt. This would also truly make college affordable for a much larger percentage of the population. With more access to higher education, a greater number of entrepreneurs (along with other student categories) would be released into society (bringing with them all of the fruits of entrepreneurship discussed earlier in this piece).
- Offer easier access to performance-based business loans that tie repayment to annual earnings for small businesses. Small businesses need capital and credit lines to function day-to-day and month-to-month. Rather than giving small businesses traditional loans with a greater risk of default, the banks should offer government sponsored business incubation loans that offer easy access to capital on the front end but require a 20% stake in quarterly profits that ensures timely repayment (automatic payments versus voluntary payments). This would give more small businesses access to greater capital on the front end while ensuring that businesses are required to pay these monies back quarterly based on their profit performance over time. The risk for entrepreneurs would be getting stuck with a business loan that their business failed to pay for as a result of a lack of profit performance. The program would require a personal guarantee on losses that would result in a mandatory personal bankruptcy without traditional business bankruptcy allowances. There should also be a cap on the number of times an entrepreneur can take this risk (maybe one to three times over a 10 year period). The idea is to create more access to capital needs for small businesses while enacting responsible banking protections that prohibit a malignant serial entrepreneur from liquidating a bank’s assets with essentially a series of fraudulent business efforts.
President Donald Trump could do these six things for small businesses and the result would be the reshaping of the American business landscape that benefits not just small businesses, but consumers as well. Our country has adopted a corporate mentality that dictates that the welfare of major corporations comes before the well-being of small businesses. This is a top down (rather than a bottom up) business growth mentality. It is high time that the average citizen be made aware that their overall quality of life is dramatically improved when small businesses are aggressively promoted and protected with strict government regulations that increase business competition (rather than decrease it) for all businesses. This is a bottom-up business growth mentality that has been sorely missing in our national economic strategy for decades (and through successive presidential administrations within both political parties). President Donald Trump could do this and, if he did, we might have to seriously consider adding a fifth bust to Mount Rushmore. Small business can save America and Donald Trump may be the only president in the history of the nation with enough business sense to understand that the political party that fosters small businesses is the party that dominates American politics for the next eight years and beyond. By comparison, the party that coddles large corporations is the party that consistently loses presidential elections. Are you skeptical of this thesis? Look no further than the last presidential election: the candidate that had Wall Street in her hip pocket stumbled embarrassingly at the polls. There is no such thing as a monolith of business. There is only small business and large business. President Donald Trump knows more than you think.
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