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Tuesday, November 17, 2009
9:42 AM EST
Pat Pelletier

The Damage to Small Businesses

Governor Patterson just can’t seem to figure it out. We’ve written before about the New York Democrat’s inconsistent tax policy statements, how serious his state’s budget issues are, and the negative effects already created. For the most part, our updates are at the policy level.  But policies of course have real world effects, and occasionally a story comes out that highlights how harmful tax and fee hikes really are. A story out of Albany demonstrates this perfectly.

Small businesses are often the most adversely effected by any misguided attempts by states to fix their overspending problems through tax increases and fee hikes. The damage is worse if the business has a single owner. Small businesses often generate enough receipts to require them to pay at higher tax brackets, but their profit margins are often so thin that any additional costs have a drastic effect.
 
A popular target for hikes are excise taxes – taxes on items such as alcohol, tobacco, and other consumable products – and their related charges. As if on cue, part of Gov. Paterson’s plan to solve the state’s deficit is to drastically increase these rates. The hikes are borderline oppressive. For instance, a license for tobacco sales alone faces a1000% increase for even the lowest bracket. These goods are often sold by small, locally owned convenience stores, such as the one in the aforementioned story. Logically when states turn to raising those rates it can spell disaster for these local proprietors. 
 
Endlessly increasing taxes does not solve overspending problems. Citizens and local business can only bear so much of a tax burden before they move out of the state or are forced to close up shop. In the long run, such policies are unsustainable. More efficient state governance and spending decreases is by far the better policy approach.
 
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