Cost to do business extends far beyond the standard fix costs of rent, utilities, insurance, etc. Recently, I read of these two business costs:
$ 7,647 regulatory cost per employee (Source: SBA)
$ 767,000 annual payroll cost for absenteeism for largest employers (Source: CCH Inc)
From the 30,000 viewpoint, many of the costs within these two figures can be attributed to taxes in some form or another. The word tax has Latin origins and means to determine the value of something. Unfortunately today, taxes have gone beyond appraisal and now extend into all aspects of business.
Are all taxes necessary? The answer to this is No. Yes, some taxes are vital to ensure the necessary public services including law enforcement, fire protection, road repair, education, etc. However, many taxes are a way for government to fund itself, as government does not make money. It must redistribute the dollars generated by the productivity of businesses and individuals through a process called taxation.
For many firms, especially small businesses, taxes are viewed as a necessary evil. Hence, efforts to increase sales and profitability are not necessarily embraced with enthusiasm. The real issue of taxes is probably fourfold:
The first issue is that taxes are viewed as an unlimited resource. When government fails to act responsibly, its first action is to raise taxes.
Issue number two is the actual use of taxes. Is government using the taxes both efficiently and effectively? Waste in government from local to national has been documented over and over again.
Especially in difficult economic times, businesses are continually being forced to reduce or cut costs to stay afloat. Yet, government continues to expand. No wonder so many business owners have resentment regarding taxes.
Third, taxes negatively affect productivity. When taxes become oppressive, individuals start rethinking why should they be working so hard while others are not?
Also, business productivity research suggests that only 25% of the employees are actively engaged on the job. The other 75% are disengaged to actively disengaged on the job. When employees do not provide an hour’s worth of work for an hour’s work of pay, the taxes from payroll to regulations still must be paid.
Fourth, the public views taxes for businesses differently. There exists an almost “They (Corporate America) can afford taxes, but I cannot” belief. In the book “Corporate Canaries,” the author makes a very valuable point: When businesses make profits, they are paying taxes. Payment of taxes is corporate citizenship.
Taxes contribute to the cost of doing business and can dramatically affect productivity. To remain profitable, businesses must look at future growth (productivity) and balance it against increased taxes.
Bottom line is that in many instances businesses are today’s real tax collectors. Unfortunately, many citizens do not understand that when corporate taxes are raised, the customers will be the ones paying the taxes and productivity will suffer because businesses will engage in reduction in force to outright terminations.
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