For Profit Entrepreneurship Saves The Day

Not the Government

One of the many open sores that are wounding the United States is rural Appalachia. For years the government has pumped money into this area to try and turn people's fortunes around. Churches have sent legions of people to do things there to help out and give the local community a base to build on. My daughter went with our church from Chicago on a mission trip when she was in high school.

Rural Appalachia has been poor for so long they don’t know any different. I don’t know if you have ever been through there, I have. Parts of it are third-world-like poor.

In pop culture, movies like Deliverance and Nell were set there. They didn’t look kindly on the local indigenous population. Documentaries like Harlan County USA featured the people there and weren’t exactly kind in their depiction. The mainstream scions that rule our popular culture constantly satirize the people who live there.

This interests me because in the summer I live in a rural, but very poor town, up in Northern MN. Cook County MN is the poorest county in Minnesota. Ironically, over 80% of the land in Cook County is owned by the government. I have seen business after business go under and Covid didn’t help.

In a lot of small towns, they look for a quick panacea. They try to attract some big box store, which kills the small businesses. Conversely, they persuade their state to give all kinds of tax breaks to some megacorporation to set up shop there but they don’t give those same tax breaks to small businesspeople.

Another government-created entity that kills small businesses is the tax increment financing district (TIF). It’s a government do-gooder program that puts a lot of power in the hands of one individual or a politicized committee that makes a decision. I was invited to serve on a task force in Chicago regarding TIFs. I listened to the debate back and forth and all the different constraints being proposed. When it was my turn to speak, I said, “Why not just eliminate all the taxes for existing businesses in the district and for any new business that starts in the district so they don’t have to apply and go through the TIF process?”

My question was immediately dispatched and I was never invited back. You couldn’t have freedom of choice. Sacre bleu!

In my northern MN town, they try non-profit after non-profit after non-profit to try and create a spark. A large non-profit is housed on some of the best real estate in town. When entrepreneurial businesses come or are proposed, the very left-wing and liberal townsfolk go to war against them as nasty capitalistic enterprises. I see housing proposed and the left-wing power brokers kill it because of zoning or some other excuse. Recently, a vacant corner of the town had a proposed building that would house retail, a restaurant, and some apartments, and many locals were up in arms for all kinds of reasons.

Instead of supporting entrepreneurs, the left degrades and tries to put all kinds of artificial constraints on them.

I read this article and it turns out small entrepreneurial for-profit capitalistic enterprises are making a huge difference and helping places like Hazard, KY rebuild.

Hazard, KY is a proxy for any rural small town in America. It might also be a proxy for decrepit areas in major US cities. America is littered with small rural towns like Hazard from coast to coast. They existed for a reason. Often, it was a place where rivers came together or they were convenient stops logistically on the way. They often had natural resources necessary for building America. Hazard, KY had coal. The environmental and US federal bureaucracy war on coal killed the town.

When a force you cannot control kills opportunity, it also kills the collective hopes and dreams of the town.

Entrepreneurship and small business formation in the United States had been trending down for decades. That’s recently changed! The US Chamber of Commerce tracks small business. Applications are up in all 50 states. Non-farm business formation is up across the board. What’s causing this?

Several mini-trends are causing small businesses to startup.

The first is layoffs. When you get laid off, you have to do something. Over the past two years, corporates have laid off people but more importantly, tech companies have laid off thousands of people. Tech people have the skills necessary to start a business from anywhere. They are doing just that.

Covid caused a lot of people to flee big cities for rural areas. Instead of moving back, they are starting small businesses in the places that they moved. That’s one piece of the early revitalization of Hazard.

How do we put some tailwind behind the sails of these small businesses?

• The first thing you can do is make taxes 0%. Many small businesses file as LLC and pay taxes at the personal income rate scale. Change that. Give them relief. Obviously, the Fair Tax is the best way to do that.

• Make business formation costs as close to zero as you can.

• Eliminate petty zoning laws that discourage small businesses from operating there.

• Deregulate. States and cities that have a lot of permitting in order for people to do things stop businesses from forming. “Hair braiding” is one type of business that is constantly held up as one that is over-regulated but there are plenty of others.

• End minimum wage requirements which kill small businesses and only help unions.

• Bring back the ability for regional and local banks to give businesses access to capital. Federal regulations like Dodd-Frank absolutely crushed small banks. Small local banks know more about their towns than some pin-stripe-suited bankers in New York. Deregulate them.

• Give tax breaks to investors that might invest in small businesses.

• Institute school choice so entrepreneurs can educate their children instead of being beholden to subpar rural government run public education systems.

This is a generalization but I think it fits. Left-wingers hate deregulation and tax breaks because it limits the control they can exert over people. Yet, at the same time, they love the idea of “community” and “local”.

Small businesses create community. They create a sense of place. They create job opportunities. They help people get a base under them so they can get ahead.

For techies that might read this, my policy ideas are “e/acc”.