Guest Post: This Is Small Business in America: Burdened, Crushed, Doomed

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

This Is Small Business in America: Burdened, Crushed, Doomed 

If you make it increasingly costly and risky to open a small enterprise, then no wonder unemployment remains high.

You hear a lot about Kafkaesque stifling bureaucracy in Greece and other struggling European nations, but America's Status Quo is trying its best to destroy small enterprise with taxes and crushing bureaucracy. I am self-employed, and have been for most of my life. When I did take a paid position, it was in other small enterprises or local non-profit organizations.

I mention this because there is an unbridgeable divide in any discussion of small business between those who have no experience in entrepreneural enterprise (i.e. they've worked for the government, NGOs/non-profits or Corporate America their entire careers) and those who have.

There are all sorts of similar chasms that cannot be crossed and which quickly reveal a surreal disconnect from actual lived reality: for example, the difference between actually playing football--yes, with pads, a muddy field and guys trying to slam you to the ground--and being an armchair quarterback who's never been hit even once, never caught a pass or ever struggled to bring down a faster, bigger player. (And yes, I did play football in high school as a poor dumb skinny kid who mostly warmed the bench for good reason, but I lettered.)

At the extreme of this disconnect, we have armchair generals screaming for war who have no experience of combat or war as it is actually experienced.

You get the point: it's very easy for well-paid pundits who have never started a single real enterprise or met a single payroll to pontificate about "opportunity" and small business as the engine of growth, blah blah blah. It's also easy for those with no actual experience to reach all sorts of absurd conclusions about how easy it is to turn a small business into great wealth. (No, Bain Capital or other Wall Street outposts of financialization are not "small business.")

In real life, it's only easy to run a small business into the ground, especially when there's a thousand tons of junk fees, taxes and useless bureaucratic requirements on your back. Lest you think this an exaggeration, consider that it took two years and $200,000 to open an ice cream parlor in a vacant retail space:

"Ms. Pries said it took two years to open the ice cream parlor, due largely to the city’s morass of permits, procedures and approvals required to start a small business. While waiting for permission to operate, she still had to pay rent and other costs, going deeper into debt each passing month without knowing for sure if she would ever be allowed to open.


“It’s just a huge risk,” she said, noting that the financing came from family and friends, not a bank. “At several points you wonder if you should just walk away and take the loss.”


Ms. Pries said she had to endure months of runaround and pay a lawyer to determine whether her location (a former grocery, vacant for years) was eligible to become a restaurant. There were permit fees of $20,000; a demand that she create a detailed map of all existing area businesses (the city didn’t have one); and an $11,000 charge just to turn on the water."

There is nothing mysterious about the cause of this Kafkaesque Status Quo: each city, county, state and Federal fiefdom must justify its existence and payroll, and everyone in each fiefdom will fight with every fiber of their being to protect their turf. Politically, it's a fight to the death to trim even the thinnest slice of bureaucracy, and so little if any ever gets trimmed.

Nobody will care until the city, county and state's revenues collapse as people opt out of supporting the bloated dead-weight of the Status Quo with their own sweat and blood.

The only way to survive is to not have a "real" business, i.e. you write code in your living room or parents' basement, or you do enough business in the informal sector (cash) to support your high-cost formal business.

Taxes and bureaucracy are not just urban phenomena, as this insightful report from Eric in Texas shows. Eric draws a critically important causal line between the stifling of small enterprise and high structural unemployment: if you make it so costly, risky and burdensome to start a business and hire people, then no wonder unemployment is high and will stay high.

One of your recent posts made me think of how difficult reinventing communities and coming up with creative solutions for the problems of unemployment and displaced people in our society is. I think it has to do mainly with the way in which lower middle class / middle class people are overburdened with taxation. As you stated in your post, the amount of taxation is staggering. Especially for the self employed, like myself.


My wife and I pay much the same percentage taxes as you listed in your post. I live in a rural area of Texas and from time to time small acreage properties go up for sale around our home. If we wanted to buy some adjacent acreage for the purpose of inviting a few of our friends, who are teetering on the edge of unemployment and facing the prospect of real poverty, to live next to us and help each other grow food, take care of livestock and find creative self employment opportunities in our area together, the resultant burden of taxation would prevent it.


For example, as I see it, my wife and I would now be paying property taxes on two properties, one would not have the homestead exemption. Any "improvement" on the new property, e.g. a small house built for our friends, would only increase the property taxes. We would also have to consider, if we planned to live together in this way long term with the major contribution of our "unemployed" friends being their labor and time invested in our communal living experiment, what kinds of taxes we might be subject to in the future based on the way we are using each others time and energy to achieve solutions for food production, child rearing, shelter, etc. I don't know if we would be subjected to any taxation in doing these things only assuming we might be.


To attempt to sum up my reaction to your post, I will make a list of what I think would impede a lower middle class person who has some discretionary income and could provide a small house and small acreage for the benefit of a few friends on the brink of poverty, with the view to the arrangement being ultimately beneficial to all involved.


1. Increased property taxes
2. The possibility of providing mandatory health insurance through "Obama care"
3. Taxes and or restrictions on what produce we can sell through farmer's markets or through the Internet, e.g. the recent crackdown on raw milk sells, and "cottage foods" like goat cheese, homemade pies, homemade canned goods, etc. In other words, if our whole way of life is to produce locally grown food for ourselves and our extended "family" and this is threatened through excessive regulation and or taxation, I wonder if it's really realistic to pursue.
4. In Texas taxes are rising, even in this recession school taxes, property taxes, fees, etc. are all going up.
5. Federal taxes look like they are poised to increase.


If I didn't have to worry about taking on the burden of all these forms of taxation, property taxes being the most onerous to me, I might could use what capital I have to invest in a communal living arrangement that I would hope to be of benefit to my family and some of our friends.


It's the idea, ultimately, that I want to reinvent my community (for me that means bringing friends in close relationship in mutual work for mutual benefit) and provide opportunities to contribute. But if that means having to tangle with bureaucrats over how much more I now owe because of my desire to do these things, I think I will be doing better to try to take care of myself, my wife, and our children, and leave the rest of my loved ones to prayer and occasional modest charity.


In short, if we were not taxed every time we tried to do something, we just might damn well do something!


Let's focus on getting rid of property taxes, and other forms of ridiculous taxation so that we can free up our energy and time to do the very things you advocated so well in your post.


I realize the benefit to myself and so many of some forms of government assistance, for example food stamps, child tax credit, energy efficiency rebates.... I think good government programs could be sustained if we did things like close our military bases around the world, brought the troops back to the states, and made education and real estate much less expensive, and allowed people to grow and market local foods without encumberance.


You wrote:


Here is the ugly truth about the Savior State, welfare state, social welfare state, or whatever you choose to call the Central State: The Savior State displaces and destroys community and social capital. By making individuals dependent on the Central State for free money, free food, free housing, etc., then the State has taken over the natural function of community.


In my opinion, it is also that the Savior State displaces and destroys even the potential for ( my main point) community and social capital. By placing oppressive, punitive, discouraging, and unreasonable forms of taxation on individuals who may otherwise extend resources of capital towards helping their neighbors, friends, and even family. In this way, then, the State has decided to oppress and retard the development of communities.

Well said, Eric, thank you. Before you jump in to "correct" this view of small enterprise in America, first list how many enterprises you have started, owned or run, and how many people were/are on your payroll.

If you think it's so easy to get rich in small business, then here's the keys, and payday's on Friday.

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Yen Cross's picture

 It's GREAT visit on my way through wine country. Check this one out! Minimum wage/ health care should excite.

Freddie's picture

Hope & Change with the Democrat's Muslim.

DoChenRollingBearing's picture

I set up, or set up with others, a total of three small businesses from 1987 - 1991.  All three businesses failed, but mostly because I was not a good businessman.  The paperwork and all was bothersome enough back then, but has become MUCH WORSE.

For the record, and in my case only: I would NEVER NEVER NEVER start a small business here in the USA anymore.  Only someone with incredible tenacity could survive and thrive in these conditions of government being so parasitical, so much so that it either kills the host, or the business aborts itself before coming into being...

The fourth business I got involved with was our bearing import business in Peru.  That is the only business in which I was a major participant that has succeeded.

Bitchez.  Do I sound bitter?  Only if I were to try here.  Our business is doing great in Peru...

UGrev's picture

I did a little contracting last year.. and by a little, I mean about 2 months worth. After realizing that the gov't took FORTY FUCKING SEVEN PERCENT of my take, I found a job elsewhere. It wasn't worth it to work my mother fucking ass off and have nearly HALF of it go the pocket of the government. FUCK THAT SHIT!!! and FUCK THE TAX SYSTEM!!!

respect the cock's picture

Start a CrossFit gym.  They're thriving.  

Hot fucking chicks too...asses that could crack walnuts.

StormShadow's picture

Like all fitness things what's hot today won't be tomorrow. If you wanna make it in any business you have to come up with what people want or need tomorrow that they don't have today

Xkwisetly Paneful's picture

It takes 65 days just to get a permit in NYC to open a lemonade stand.

It costs a million dollars in some cities to get a permit to run taxis.

The government currently is creating 80,000 pages of rules and regulations each year.


GoinFawr's picture

And they are removing ~80,000 pages of rules and regulations for the Too Big Too Frail Banks every year; so at least we have that going for us.

mediaprizm's picture

Nice effort, very informative, this will help me to complete my task. Ecommerce Fulfilment

sgt_doom's picture

But of course, it is crucial to examine just what those forces are which are destroying small business or, as S.F. author Robert A. Heinlein once so aptly observed, big business has killed free enterprise in America!

A bill passed the House awhile back, with a RepubliCON majority and the usual turncoat dems, or rather faux crats, which gave SBA loan preference to those small businesses which had been invested in by private equity firms and hedge funds!!!!!!

Now, are those really "small businesses"??

In case this blog poster hasn't noticed, there has been a massive, ongoing consolidation of media, business, and most of all, the fantasy finance sector, as in few top banksters, leading to few Primary Dealers. Gomer used to exclaim!

Too often, the major corporations fund "foundations" and "stink tanks" which lobby for ever more benefits for the lower-end small businesses with the lowest revenue percentages (not that those workers don't deserve it --- but obviously it is to burden the small businesses, while the state and municipalities grant ever and ever more tax breaks and corporate welfare to the top corporations).

One Global Bank/ one global corporation....

DeadFred's picture

Yes. The government is owned by the large corporations. It shouldn't surprise anyone that they pass so many regulations that inflict a death of one thousand cuts on the primary competitors to big business. Small businesses are often lean and mean but lack the resources to deal with regulatory and legal issues. These new regs aren't such a problem for a corporation that already has large staffs to deal with such things.

Fred Hayek's picture

Big business uses big government to attack or at least fend off small business.
If the business environment had been as corrupt 30+ years ago, Honeywell would still be a top computer company and Steve Jobs would've just been that vegan asshole who used to hang around with Wozniak while Wozniak was tinkering in the garage (before he gave in and started working for Honeywell, or was it Xerox?).

G-R-U-N-T's picture

Indeed, and it just not the regulatory squeeze but they stretch their payment terms to local vendors who haven't the cash reserves to await 90 day payments of invoices. Local vendors have to pay their suppliers whom often have as little as net 15-30 payment terms because their getting squeezed as well. Trickle down squeeze until their unable to be competitive with the larger suppliers and then their finished.

What's sad is that in my community local manufacturers who work their ass off to please their customers get crushed when large corporations come in and buy businesses that got their start in the community. These corporationg come in with little regard for the "little guys" who helped build them up over the years.


Ghordius's picture

indeed all governments in the world behave like a forest guard that tries to kill for years the underbrush so that the huge pine trees can grow straighter, better, higher. as if the pine needles that rain from above would not be doing it already. the US simply happens to be the forest with the biggest amount of giants and the smallest, future-holding underbrush.

added-> This is only in part deleterious as chosen small/medium firms can be catapulted from zero value to IPO's of gargantuan size, instead of having an organic growth

big business and small & medium businesses are so different that they would require completely different standards and laws, IMO.

the current setup is 100% skewed versus big biz, capital raised in the stock and bond markets, the supranational corporation not paying taxes anywhere and, the glaze on the cake, the MegaBank with it's imaginary accounting.

GoinFawr's picture

I favour a sliding regulation scale: the bigger the business, the more onerous the rules; the smaller, the simpler (Assuming collusion and fraud are not permitted to circumvent the letter/spirit of such a regulatory environment, natch).

DaveyJones's picture

everything is consolidating and the process is accelerating.

the scariest are food and "free" speech.

super pacs and our super supreme court decision were the final blow.

if we love our children, something has to happen  

RichardP's picture

If you truely loved your children, they would not ever be born.

LFMayor's picture

I bet your parents say something similar to that.

Emiliano_Zapata's picture

Freddie, you're a fucking moron!


CIABS's picture

EZ, don't feed the trolls.  He's not a moron, he's an agent.

duo's picture

At least Texas taxes land, not labor.  If you tried to start a commune like that in CA, you'd pay a lot more in taxes.

Yes, property taxes in TX are high, but it beats the heck out of income taxes and keeps real estate reasonably priced. If you don't like paying a lot of property taxes, don't buy an $800,000 house (which would cost you about $20K a year in property taxes if you lived in Dallas county).

I'll take property taxes over income taxes any day.

Cthonic's picture

Labor is taxed as a "taxable service" under sales and use taxes.  Texas taxes 'business personal property' (e.g. capital equipment) as well.  And don't forget the franchise tax, and a skein of industry-specific fees.

vintageyz's picture

Amen.  I just opened up my business water bill.  The amount for the actual use of water is less than the "fee" for storm water runoff; and there are no storm water drains on the property.

Who is John Galt


aleph0's picture

15,000,000,000,000 Recs !


LetThemEatRand's picture

Who is John Galt?  He's that asshole in the Ferrari who just cut you off on his way to his beach house.  He's not paying attention to the road because he's on his cell phone talking to his investment advistor and bitching about taxes.'s picture

That's the kind of comment I would expect from someone who only sees the world in black and white: government = good, individuals = bad.

LetThemEatRand's picture

How ironic and completely self-loathing.  No, you won't get it.  Don't even try.'s picture

As the anti-Rand you should approve of self loathing.

GoinFawr's picture

When Ayn Rand went on the dole I wonder if she experienced any self-loathing?

Or is ironic self awareness simply beyond the comprehension of "I'm all right so fuck all the resters"? Wouldn't surprise me, seeing as denial is such a crucial element of the whole ethos.

That said, despite a promising start this article quickly went from attacking onerous red tape for small business to becoming nothing more than a run-of-the-mill whine about taxation.

Some of the comments contain more substance... disregarding all the usual false dichotomies, strawmen,  and blatant misrepresentations provided by the likes of you, natch.'s picture

Rand was forced to participate in Social Security. She had no choice. Accepting restitution from those who had robbed her did not make her a hypocrite.

GoinFawr's picture

'Forced'? No, 'chose'.  If anybody held a gun to her head it was the private health care system of the US and its patently overpriced treatments/drugs.

Hahaha you lot are so pricelss: I just love the rationalization that it's entitled 'resititution' when Ayn Rand or you goes on the dole, but 'parasite' when anybody else finds themselves in a desperate situation. It all depends on the cut of the jib, I guess.

You should have bought more copies of her shitty books.'s picture

Since when is participation in Social Security voluntary? You must be trying to lie to yourself because the rest of us know the facts.

GoinFawr's picture

'Do as I say, not as I do.'

Apparently the irony of your position is lost on you. Admittedly, if it wasn't it would be impossible for you to continue hold it forth with a straight face.

Me, I find that infinitely entertaining.'s picture

Yes, it is hilarious to hear you state that those who don't believe that the government should operate a mandatory retire program should be forced to pay into that program but should never be allowed to recover their loses. There could be no better confirmation of your desire to see wealth forcibly transferred from those who produce it to those who do not.

If you're not a hypocrite and wish to prove to me that you really believe that those who earn money don't deserve to spend it then send me a check. I'm sure I'll find your refusal to redistribute your earnings to me highly entertaining.

GoinFawr's picture

By way of your very own line of 'reasoning':

"Fred stole from me, so that means I have the right to steal from you."

So rich. Where did that money come from that she 'recovered'? By the time it became convenient for her to rationalize sucking at the gov't teat her contribution was already spent (assuming she actually had paid enough taxes to cover her care costs, and all the other social benefits she reaped from being USean), which means she was supporting the gov't 'stealing' mine.

 So how do I 'recover' my money from hyprocites like her and you?

"If the gov't steals from me, that gives me the right to necessitate them stealing from you."  I don't recall reading anything like that in Atlas Shrugged... apparently 'speed freakin gimme gimmes and the me firsters' can rationalize anything when it comes to their own well being, regardless of what they're on record saying in the past.

No, she had a choice, the same as you. She talked the talk, but when push came to shove she didn't walk the walk.'s picture

I'm still waiting for you to redistribute your earnings to me. While you're writing out the check please consider how you can justify a government safety net of any kind now that you have admitted that government produces nothing itself and can only obtain funding through theft.

Pot. Kettle. Black.

GoinFawr's picture

'By way of your very own line of reasoning' was too confusing for you?  Sorry, there's not much I can do about that.

Theft is when somebody takes from you something that isn't theirs to begin with, not payment due for services rendered or benefits rec'd.'s picture

Money extracted by force for services which were not requested is called a protection racket. It's nothing more than organized crime.

I'm still waiting for you to send me a check. Seems like you are only in favor of redistribution of wealth when you can occupy the moocher side of the transaction. But as I have not  rendered you the "service" of holding a gun to your head perhaps you don't feel compelled to pay me.

GoinFawr's picture

nobody is forcing you. You can leave whenever you like, I hear Equatorial Guinea has as incredibly low tax rate: ie you have a choice. Or you can stay and refuse to pay taxes: fight. Another choice.  Neither choicxe is for faint hearted recreants though; which I suppose explains why you're still here and whinging.

"Seems like you are only in favor of redistribution of wealth when you can occupy the moocher side of the transaction"  You wish. Unfortunately for you I'm a private contractor and  I pay taxes. Your worst nightmare.

"Money extracted by force for services which were not requested is called a protection racket. It's nothing more than organized crime."

You've taken the  tired old line of deliberately conflating two very different things.  Organised crime bosses aren't elected by the businesses/people they exploit, nor or they in any way accountable to the same, unlike elected representatives in gov't who are charged with implementing policies the majority of their constituents want (ie the very opposite of 'exploit').

 Big fucking difference there fanboy.

As for the 'not requested' part, I'm absolutely positive that you take for granted and receive an array of goods and services provided by your fellow USeans and their predecessors, which you would soon be kicking and screaming about were you to suddenly have to pay a user fee to enjoy.

<Hands CA a good length of rope> In your ideal world, is there anything at all that would be considered 'public' property?

CIABS's picture

Harold Bloom correctly said that Ayn Rand couldn't write her way out of a paper bag.  The writing is no better than the "thought".  Her vision of redemption will never happen, and her fanboys would regret it if it did.

GoinFawr's picture

"...and her fanboys would regret it if it did."

All I've ever tried to say, nice.  Though I confess this lot sometimes pisses me off to the point of hoping that they actually get what they're asking for, because they so obviously have no idea what that really means.

"He's the one who  likes all (her) pretty songs. And he likes to sing along, and he likes to shoot his gun. But he don't know what it means; don't know what it means..."'s picture

How gay do you have to be to employ the word "fanboy?"

GoinFawr's picture

fanboy, how desperate do you have  to be to attempt to  focus attention on something as trivial as that? (rhetorical question)'s picture

Yeah, I'm "desperate" because an anonymous poster on the Internet thinks he's winning an argument against me. Oh, woe is me. How can I go on?

GoinFawr's picture

there there fanboy. It'll be ok. Just slap on that ol' Ronald Reagan lp and you'll soon slip back into your favourite delusions; and if  that doesn't work there are always some Maggie Thatcherisms to be reviewed.'s picture

I never voted for Reagan. I voted for Jesse Jackson in th '84 primary and Mondale in the general. Didn't vote in '88. But you're used to being wrong.

GoinFawr's picture

Goodness gracious CA, I take deep unbrage to what y.... oooer, wow. I really was way off on that one wasn't I?  That'll teach me to go putting dead presidents and prime ministers into people's mouths.

Jesse Jackson, though, seriously? Tell me you voted for Ralph Nader just once this century and I'll even take back everything I said about Ayn Rand;  but I flat out refuse to read Atlas Shrugged again.'s picture

I voted for Nader in 2000. Kerry in 2004. Ron Paul in the 2008 primary. Read Atlas in 2009.

GoinFawr's picture

Ayn <choke> Rand is <gasp, retch> GOD! There, I wrote it; I won't be able to sleep tonight, but a promise is a etc etc  and all that.

Man's a Man for All that
(Robert Burns)

Is there for honest poverty
That hangs his head, an' a' that
The coward slave, we pass him by
We dare be poor for a' that
For a' that, an' a' that
Our toil's obscure and a' that
The rank is but the guinea's stamp
The man's the gowd for a' that

What though on hamely fare we dine
Wear hoddin grey, an' a' that
Gie fools their silks, and knaves their wine
A man's a man, for a' that
For a' that, an' a' that
Their tinsel show an' a' that
The honest man, though e'er sae poor
Is king o' men for a' that

Ye see yon birkie ca'd a lord
Wha struts an' stares an' a' that
Tho' hundreds worship at his word
He's but a coof for a' that
For a' that, an' a' that
His ribband, star and a' that
The man o' independent mind
He looks an' laughs at a' that

A prince can mak' a belted knight
A marquise, duke, an' a' that
But an honest man's aboon his might
Gude faith, he maunna fa' that
For a' that an' a' that
Their dignities an' a' that
The pith o' sense an' pride o' worth
Are higher rank that a' that

Then let us pray that come it may
(as come it will for a' that)
That Sense and Worth, o'er a' the earth
Shall bear the gree an' a' that
For a' that an' a' that
It's coming yet for a' that
That man to man, the world o'er
Shall brithers be for a' that