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Government High Taxes and Effects on Small Business

Updated on December 18, 2010

The tax burden of small business

Over the Thanksgiving holidays I had the pleasure to visit the charming town of St. Charles, Illinois, a suburb of Chicago. The small downtown is unique because of the number of family owned businesses. One of my favorite stops when I’m in the area is to stop at the Bull & Bear Ltd Tobacco Shop, a very nice locally owned business.

I bought a couple tins of smoking tobacco and a few cigars then headed to McNally’s Traditional Irish Pub. Over a pint of Guinness I began to wonder if the government is trying to intentionally run small businesses such as the Bull & Bear out of business.

The state of Illinois, like many other States, have problems managing their budgets so other means of income are desperately sought. In this case, the burden falls disproportionately among small businesses such as the Bull & Bear. My purchase was taxed at a whopping 18.80% between local and state taxes.

Granted, I’m sure this purchase was taxed at a higher rate because of the content being tobacco. One of the excuses States use to justify high taxes on items such as tobacco and alcohol is for health reasons. The higher the tax the more likely the person would stop using these products the logic goes. That is what the government wants the public to believe, but we all know that’s not necessarily the way things work.

What would happen if everyone stopped buying alcohol and tobacco? I believe State and local governments would go bankrupt. Those taxes we pay on those products would be shifted to other services and products to make up the shortfall the governments would now face.

A small business in our society, not only needs to put up with high taxes such as these, but in many cases there is city, county and state additional fees and licenses costs. The Bull & Bear looks like a strong business that is located in a wealthy suburb. Other mom and pop stores are not so lucky. I would think, that as more small stores are forced to close because of these high taxes, the higher the tax rates will go up to cover the loss of revenue. Isn’t that the way things work?


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