Why Do So Many Small Businesses Fail?

I keep seeing politicians come on the television and say they’re going to fix the economy, create jobs and raise wages. I’ve been listening to the same promises my entire adulthood while simultaneously staring at a fundamental flaw in the economy that no politician is talking about. If they do talk about it, it’s just long enough to acknowledge a problem exists before changing the conversation back to meaningless talking points.

The problem is that it’s really, really, really, really hard to start a small business. Over half of all small businesses fail within their first year. Politicians have said that much, but they never sink their teeth into why. People don’t fail at businesses because it’s so hard to provide someone else a product or service and then take their money from them. The hardest part about running a small business, the part that trips so many people up, is that the government will send you to jail and fine you into poverty if you can’t flawlessly navigate 10,000 miles of legal bureaucracy.

If you want to succeed in business, you basically need an associate’s degree in economics. If you don’t believe me, go get a tax number, file your small business name, write a business plan, and pick a piece of accounting software to help you organize your taxes. Most people won’t make it that far.

You may be shouting, ” But that’s how business works! If you can’t do that much, then you’re too stupid to be in business!” The thing about that is, it doesn’t have to be so hard to start a business. Our predecessors just went out of their way to make it that hard. I’m sure they had good intentions and reasons that sounded reasonable on paper, but the end result is they’ve created a very narrow bottleneck to owning/operating a small, private business that excludes the poor and uneducated.

I don’t know or care if there’s a conspiracy theory behind this or if it’s just the cumulative effect of millions of stupid decisions. I just care that the deck has been stacked against the poor and uneducated. If all humans are equal then all humans should have an equal chance at an education and owning their own business. Even if a human is stupid…why would we punish them for that? And if all they’re trying to do is sell oranges on the side of the road, why do we need to bring mind-bending bureaucracy into their life at all?

The reason why is because the American tax code assumes every transaction that can possibly be taxed must be tracked and taxed. I believe the I.R.S.’s philosophy does more harm than good, and I base that opinion on the fact that every night the news says the economy is terrible. The reason it’s terrible is because we’re doing something terribly wrong. Obviously, the economy has more problems than just this, but I suspect that as long as we keep assuming that every transaction which could possibly be taxed must be tracked and taxed then the economy will continue to be terrible, especially for the poorest, most uneducated human beings living on earth.

Other than “Tiger Mom,” I’ve never heard of a book on success or leadership that advocates micromanaging. In fact, everything I’ve ever read said it’s the most stifling, soul-destroying approach you can take to accomplish anything. So… if we apply that same principle to the tax code, it points to the conclusion that maybe we should lighten up there.

If people can make money, they’re going to spend it. It’s going to get caught in the tax net somewhere. If people just didn’t have to file anything or pay any taxes for small businesses that make less than $10,000 per year, then people will have the breathing room to establish their small businesses before leaping into the realm of completely retarded bureaucracy. That wouldn’t threaten big businesses’ effective monopolies. It would just give human beings some breathing room.

If the I.R.S. ever wanted to help the nation out a little more they could automatically assign everyone with a business tax id number and generic business license so nobody has to apply for anything when they start operating their small business. They just operate under the codes they were born with.

If the I.R.S. ever wanted to help the nation out a little more they could automate their personal income tax system a little better. Maybe the smart folks at N.A.S.A. can help them. If N.A.S.A. can figure out how to land a cyborg on Mars remotely they can probably figure out a way to automate everyone’s yearly income taxes so we don’t all get sent calculus riddles by snail mail that we have to pay a seasonal accountant $300 to solve just so they can tell us a random amount we have to pay on top of that.

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