“The Contribution Businesses Make” an essay by Pat Slattery

Today’s Guest Saturday post comes to us from Pat Slattery of The Free market Project. I was originally published on May 3, 2012.

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The Contribution Businesses Make

 

One of the things that changed my life, and my view of capitalism, was something my father did when I worked for his company. At that time I was still under the sway of my college training and relentless demonization of “corporations” in the media and by Democrats in particular. It seemed the bad guys were always businessmen.

A short history (which I only appreciated fully after I took my blinders off): My father started a company (publicly traded) when I was a little kid. The company was successful, due mostly to his hard work and vision. It wasn’t an Apple Computer, by any stretch of the imagination, but it was a profitable small business that provided needed products for industry, made money for investors, and employed about fifty people. (If you read my book, The Tamarack Conspiracy, the company and characters I describe are taken from the real thing).

On a bit of a lark, partially in reaction to some politician talking down business, my dad gave the comptroller of the company an assignment. He wanted to know how much the little company he’d started had contributed to society, forgetting the value of the products to the consumers, but just looking at the taxes collected by the federal, state, and local governments. To do this, you need to look at corporate income tax (paid to the feds and state), but also the taxes paid by the employees (who couldn’t pay those taxes without those jobs), also including the FICA, and the property taxes paid locally. The comptroller couldn’t figure out a way to estimate sales taxes paid by employees for purchases that would be accurate (purchases made possible by the employees having a job that gave them pay that allowed them to make purchases), or how to estimate gasoline taxes paid (again, as a result of people having a job that gave them pay that enabled them to drive), or what the property taxes paid by employees owning their homes (as a result of, etc. etc.) amounted to. Those items were extra, but also made possible by the company being successful enough to hire people, and pay them a good wage.

The existence of this relatively small, fairly successful company, over time, had contributed many millions of dollars to society (if you define society as governments). It had also supported communities with donations both to charities and community activities such as sponsoring baseball teams and community projects such as building parks.

The business was not built for greed, by the way. It was built for love. My dad loved the product he’d invented that started the company. He’d seen a problem and he figured out a way to solve it. He loved the freedom of working in his own company (though, as CEO, he really worked for his shareholders, customers, and even his employees… something most people don’t really understand who have never owned a business). He really loved his employees, and they loved him back. Nobody was happier than my father when an employee was able, because of their job in my dad’s company, to get married, or buy a house, or even purchase a cabin on a lake. I believe this is true of most entrepreneurs. Sure, they want to get paid, but they want to get paid as a result of having done something worthy, having contributed to people’s lives with their product or service, and the money is simply the acknowledgement of their success at having made that contribution.

My point, however, is the millions of dollars that rolled out of that small company that paid for government at all levels. Businesses make government possible. They not only create wealth in the private sector, but they are the only vehicle for producing the wealth consumed by government. Anything good government can do can only be done because of the businesses that are creating the wealth. This is obvious to anyone who would read this blog, because I assume my readers understand free market capitalism and wealth creation. But there are people, one of whom occupies the White House, who don’t seem to understand this simple concept. Harm businesses and you harm everything.

An aside: One day I was sitting on the dock at our family’s cabin, fishing (when I was in my early twenties my dad was finally getting paid enough so that he could afford a vacation home–something VERY common in Minnesota and the rest of the upper midwest). I was watching the clouds and it suddenly occurred to me that the way water was transported by nature–oceans and lakes, evaporation, condensation into clouds, clouds roaming over the land, rain and snowfall, rivers taking the water back to the oceans–was an incredibly efficient system. It is a beautiful design, really.

Back to business: Harming businesses (with taxes, regulations, cronyism, creating a business unfriendly environment in general) is like figuring out a way to destroy clouds and then wondering why there’s a drought.

My father’s little company (still going, by the way, even after his death–I don’t work there though) contributed many millions of dollars to society. In my post yesterday I called your attention to a PJTV episode of Trifecta in which Bill Whittle talked about the same thing regarding a huge company, the richest company in the world at this moment, Apple Computer, which was apparently accused of not paying it’s fair share of taxes. How many billions do you suppose Apple Computer could account for over time if it did my father’s little experiment and tallied all of the tax revenue generated not only through corporate income tax, but also the taxes collected because of the jobs it provided, and the property taxes it paid? From the smallest mom and pop operation, to companies like my father’s, to Apple Computer, the contribution of business is… Well, it’s the only contribution there is. That’s the bottom line.

Where else is government at any level going to get money? No businesses, no jobs, no taxes collected, no government. Why don’t leftist, statists understand this? Rather than appreciating the miraculous efficiency of evaporation and cloud formation and precipitation and rivers, they’re cursing the clouds and trying to destroy them.

 

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3 thoughts on ““The Contribution Businesses Make” an essay by Pat Slattery

  1. I often wonder what system leftists think can actually replace wealth creation in the private sector through free market capitalism. A command economy, such as communism, clearly doesn’t work. It doesn’t even make sense. It’s been tried and has failed every time. It seems they want some weird hybrid system that seems to retain some semblence of capitalism, but with huge amounts of government interference and cronyism. But shackled-market capitalism is a very different beast than free market capitalism. I picture goverment trying to milk a starving old cow.

    It’s the dynamic and innovative nature of capitalism that makes it work. On the high end we just saw Facebook go public, creating many millionaires, and possibly a billionaire or two. I don’t know how many people are employed directly by Facebook (literally a company born in a dorm room by a guy and a pal), but I know that there are already many companies and jobs that have been created just to provide services that help people utilize Facebook to make money for their own businesses. On the lower end we have a company like my dad’s company that I described in my post. The company itself employed about 50 people (good jobs, by the way, paying well above minimum wage even for the lowest guy on the totem pole, and which included health insurance, a matching 401K contribution by the company, and an employee stock ownership program). That company was created because my dad wanted to be an entrepreneur and, while working for another company, he saw a need for a product and had an idea of how to make it (it was a solution so simple and elegant that it seemed stupid that nobody had already thought of it). He raised money, went public on what was then a local over the counter exchange, and… well, like I said in the post, the result was millions of dollars paid out in taxes on corporate income, employees’ salaries, property, etc. 50 people living a life… having a job that paid a living wage so they could get married, have kids, enjoy vacations, etc.

    Maybe the question we should ask the leftists is, “What’s the alternative to capitalism, which is the only system that has ever created tremendous wealth for a nation and upward mobility for its people?” They will have no answer. Will that stop them? Probably not.

  2. Pat,

    Thanks for the article. It demonstrates the power of individual entrepreneurs in the economy, and the perverse greed of governments to maximize their revenues through confiscation. As you noted, your father’s enterprise successes are but part of the story of capitalism and free markets.

    The employees contribution to taxes could not be calculated because of all the independent situations represented. Likewise, the individual employee contributions to the economic vitality of the nation is not understood by government bureaucrats.

    The idea that millions and billions of individual economic decisions could be superior to a single government’s ability to decide is beyond many.

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