Written by The Business Journal Staff
Being the CEO of an insurance agency has given me the opportunity to observe, and partner with, hundreds of small businesses in almost every sector of the private economy. In essence, I get a front row seat in the arena of the American Dream.
Every business owner I know wants to achieve growth and profitability. Because expenses rarely decrease, especially in the relatively hostile business environs of California, a certain percentage of revenue growth is essential just to stay even. Growth beyond that baseline, properly managed, can produce profits, and profits produce reinvestment into people, equipment and facilities.
This is where growth is often derailed, however. There is a “war on profit” being waged in political circles at primarily the federal and state level that is both irrational and economically absurd. What the politician wants above all else is tax revenue, and because so few of them have any experience in business, they don’t know what they are doing. So they pursue high tax rates on the profit, thinking they can “help” people by laundering that money through government (which takes a hefty rake) and redistributing it where they see fit.
In doing so, the business owner is left with much less to reinvest. Less money for higher wages. Less money for hiring. Less money for capital investment. Less money to cover health insurance costs. Less money to match retirement contributions. And so, growth rates in high tax states are bludgeoned by clueless politicians.
So where is the disconnect between economic reality and public policy? It lies in two places. First, the politician generally doesn’t know the small business owner, so the assumption is that the small business owner wants lower tax rates to simply pocket more profits. I suppose that would be true for the sliver of those in business that have no desire to reinvest in growth, but for the vast majority, it is a completely false portrayal of their motives for being in business and taking the risks they do every day.
Second, many of the employees of small business themselves have personal beliefs antithetical to growth — they go home at night and agree with the politician looking to “soak” the successful business owner, unwittingly supporting policies which stifle better wages, increased hiring and richer benefits. And before you shake your head thinking the business owner doesn’t care about such matters, please be aware that in order to attract and retain the best and most productive employees, we have to pursue the best for them and their families!
Third, and last, is the business owner him or herself. There is an overall lack of engagement in politics and with educating employees that hurts the cause of pro growth policies. Minimally, every small business should invest in a membership in their local Chamber of Commerce and rigorously insist that it keep locally elected officials feet to the fire on issues of taxation. At the federal level, there is no better investment than the National Federation of Independent Business to advocate for pro growth tax and economic policy. I have no sympathy for businesses that are not members of these fine organizations.
At the employee level, it’s important to let your team know where you stand on issues affecting the business environment, and to draw a picture of those issues and how they relate to their personal well being. Everyone in our company knows where I stand, and I’m careful to keep it non partisan and especially careful to not ask employees about their politics. It’s none of my business.
It is not a coincidence that economic growth will have not surpassed 3 PERCENT in any year since 2005 in the US. Our government is taking too much from business. To break that log jam, business leaders need to engage not just political leaders and pro business organizations, but their employees, if we’re ever going to be the high growth engine of the world economy again.
Michael Der Manouel, Jr. is President of Der Manouel Insurance Group, in Fresno, CA.