Most businesses - and several business associations - were carefully silent on Measure 30.  Intel, a bellwether as the largest private employer in the state, kept mum.  Associated Oregon Industries was equally coy.  And high profile Nike joined the recently created Oregon Business Association to campaign actively for the tax.

   On reflection, we shouldn't be surprised when businesses don't fight for good economic policies, and at times even fight in favor of bad ones.  There's no reason to think business people are much wiser or much better versed at economics than the average person - they may be honestly mistaken in thinking that higher taxes will somehow help Oregon.  And when it comes to specific taxes or regulations, it's often in business people's self interest to actually encourage them.
   There are three reasons for businesses to act this way: they are timid, 
or foolish, or greedy.

Timidity

   Why would a business person who privately opposed a tax increase be 
unwilling to oppose it publicly?
   First, business is a very different pursuit than politics.  In politics 
no matter what you say or do - no matter which side of an issue you are 
on - you can upset somebody. Businesses are not in the business of 
upsetting potential customers.
   A very large automobile manufacturer and a very large seller of greeting 
cards recently taught a very large television network about this sort of 
thing.  When fans of Ronald Reagan discovered that the network was going 
to present a program which contained misrepresentations - lies - about 
their hero, they rose up in righteous wrath and promised a massive 
boycott.  These two advertisers pulled their sponsorships, and suggested 
that the network could fill the time with better programming.

   This happens on smaller scales, too. In one Eastern Oregon town 
recently, two families were economically destroyed and driven out for 
opposing a local school levy.  The pro-tax forces, even after they had 
won, organized a boycott against the insurance business of one family 
and the small store of the other; within a year both were on the verge 
of bankruptcy and moved away.
   Visionary author Jane Jacobs explains this in her book "Systems of 
Survival:  A Dialog on the Moral Foundations of Commerce and Politics". 
    Jacobs suggests that businesses are under natural pressure to shun 
the use of force, to be honest, to tolerate dissent (i.e. as a means of 
encouraging innovation), to cooperate, and so forth.

   But politics, the public sector, is very different.   A successful 
political organization is under natural pressure to be obedient, loyal, 
occasionally deceptive, and vengeful.
   If Jacobs is right - and I believe she is - then it's normal for 
individual businesses to largely shun politics, and for their trade 
associations to be relatively timid.
   (By extension, unions are naturally more political than commercial, for 
they exhibit most of the features that Jacobs describes as political - 
including exclusivity, honor, loyalty, and vengefulness.  If true this 
would indicate that unions will be more politically effective than 
businesses, yet less prone to be sources of innovation or efficiency.  I 
think experience validates that prediction.)

   Should we expect this to change?  No.  Most businesses will continue to 
take whatever the easiest path seems to be.  Looking to them as a 
reliable source of brave or effective political leadership will be a 
mistake.

Ignorance

   An oft overlooked reason for business people to back taxes or other bad 
measures is that business people are people.  They are apt to make 
mistakes.
   Journalists believe, or like to pretend, that business people have some 
sort of insight into what makes for "pro-business" public policy. 
There's no reason to suppose this journalistic assumption is right.
(OMED: Amen!!!  In my former career as an advertising agency creative 
director, I can testify that Mr. Cox is absolutely correct here.  I have 
with my own eyes seen both businesses and dealer associations commit 
suicide out of pure stupidity. I could cite examples that would stand up 
in a court of law.)

   Would we expect a room full of school children to know what education 
policies are better than others?  Do crime victims gain sudden insight, 
beyond that of professional criminologists, into what makes one crime 
fighting policy more effective than another? I once suggested that a 
journalist, seeking comment on free speech issues, should interview a 
gap toothed stuttering newsboy.  After all, he sells newspapers, so 
shouldn't he have special knowledge First Amendment issues?
   One of the ways to tell good "pro-business" policy from bad is to look 
at historical examples, and to compare similar states and countries with 
different policy regimes.  Needless to say, business people do not spend 
their time making such historical and contemporary comparisons.

   Additionally, we must admit that often businesses are successful without 
knowing why.  I recently listened to a talk by one of the McMenamin 
brothers, describing their company's strategy, philosophy, and operations.  He freely admitted he wasn't sure what they were doing right, or what their corporate culture was or how they maintained it - his audience questioned him closely and we got a reasonable picture, but not because he or his company had any master plan.
   Given all this, it would be absurd to expect any particular business person - even a passionate one with strong positions - to have special insight into good or bad policy for encouraging business growth.  (For verification, one need only look back to the 1950's and the blind acceptance by business leaders that Socialist central planning was good policy.)

   Finally, business people are susceptible to normal human pressures. Senior executives may want to be invited to the "in" gatherings of Portland's liberal social elite.  One Libertarian of my acquaintance tempers his fiscal conservative rhetoric in deference to his wife, a public employee.

Greed

   The biggest mistake of all, however, is assuming that one business would 
willingly promote a policy that benefited all businesses equally. That's 
nonsense.  Any business is going have an incentive to promote those policies that benefit themselves, most often at the expense of their competitors, customers, and taxpayers.

  (OMED: Both capitalism and socialism must deal with human faults. 
Socialists, by governmentalizing the means of production, disallow individual failure, which protects bad judgement. Eventually, the entire system is rotten and collapses, just like the old Soviet Union. Capitalism, however, changes the effect of greed by putting it in a competitive [non-protected] environment.  The idiots are allowed to fail at little expense to the citizenry.
   The result is a general trend toward efficiency and improved quality which is generated by a human trait more powerful even than greed -- the desire to survive. )

   Adam Smith, the father of free market economics, recognized this.  As he 
put it in "The Wealth of Nations," business people "seldom gather 
together except to conspire against the public interest."

  (OMED: This is also true of other associatons -- unions, for example -- which is why while government protection for any association may to some degree be necessary -- we must always be vigilant that protection of one special interest does not exceed protection of another.  In English, this means, to give one example, that if the government favors --gives more power to, protects to a greater degree --  labor heavily over business, you get France.)

   Smith went on to say that companies often seek out government regulation 
as a way of reducing competition, thus driving up prices and profits: 
"Regulated companies resemble, in every respect, the corporations of 
trades so common in the cities and towns of all the different countries 
of Europe, and are a sort of enlarged monopolies of the same kind. [...] 
When they have been allowed to act according to their natural genius, 
they have always, in order to confine the competition to as small a 
number of persons as possible, endeavored to subject the trade to many 
burden some [sic] regulations."

   For example, $400 million in US taxpayer dollars goes to McDonald's to 
promote Big Macs to European consumers.  There's no policy defense for 
that.  It's pure corporate welfare.  But McDonald's fights hard to keep that subsidy, and in fact it's worth their while to spend up to $399 million to keep it - they would still turn a profit.  And in reality it seldom costs a well connected business so much.  Archer Daniels Midland spends only pennies on the dollar protecting its billions in taxpayer subsidies.

   Closer to home, the Oregon Legislature recently passed a nasty little 
bill that effectively ham-strung smaller moving companies to the benefit 
of their larger competitors.  The smaller firms generally charged lower 
rates and employed a large and diverse group of part-time workers on 
evenings and weekends.  The larger firms employed a smaller number of 
full time professional movers to do the work.  These large firms, under 
the guise of "consumer protection" pushed a law for the Oregon 
   Department of Transportation to levy a $100-per-worker "license" fee on 
all movers in the state.  (We can leave aside the jurisdictional 
absurdity of ODOT regulating who packs the china in your living room.) 
The weight of those fees fell disproportionately on the smaller movers 
who, having more workers, had to pay more, and who also had lower profit 
margins and were less able to absorb the cost.  There has been no 
discernible "consumer protection," nor was that ever the real purpose.
(Protecting consumers is a perfectly valid government activity - indeed 
it's one of government's core functions.  Police should arrest and DAs 
should prosecute movers - or anyone else - who use force or fraud to 
harm anyone's life, liberty, or property.  The above mentioned fees, 
while effective at harming lower cost competitors, do nothing to protect 
consumers.)
   Measure 30 holds, or held, some similar provisions.  The idea of a 
higher "minimum tax" for businesses certainly appeals to left wing types 
who simply hate businesses, and are happy to tax them even when they 
aren't profitable.  More insidiously, such a tax falls most heavily on 
those marginal businesses that are struggling to stay afloat from year 
to year, and may not have $5,000 to spare.  That's exactly the business 
that serves the public best by keeping prices low and competition keen 
(not to mention keeping people employed) - and it's exactly the business 
that richer competitors most want to drive into bankruptcy
.
Conclusion

   What lessons should we take from the Measure 30 fight and the treachery 
of some businesses and trade associations on tax policy?
   First, we need to make the case for good tax policy on its own merits, 
as Reagan did, appealing to voters' basic ideas of fair play and the shared values of free market America.  Relying on corporate America for 
a free ride or a subsidy in this fight won't work.

   Second, we need to tear the veil off of corporate welfare.  Whenever we 
falsely connect large businesses with good fiscal policy, we make it more attractive for big-tax interests to bribe those businesses, and more likely the businesses will seek the bribes.  We should only publicly praise large companies - or any size companies - that get ahead without taxpayer handouts.  Corporate welfare - the selective enrichment of some companies and not others at public expense - is corrupt, dishonest, and harms the economy.  (Ideally, all business taxes would be abolished.  Businesses do not pay taxes - they merely collect them by raising prices and lowering wages.  That makes the real tax burden indirect, hidden, and thus exempt from review.)

   Finally, we need to recognize that businesses often do seek out 
regulation and tax-law changes in order to reduce competition and thus 
puff up their own profits at consumer and taxpayer expense.  The only 
effective counter-weight to ever-growing government spending will be 
political.  We need a political party that is committed to defending a 
true free market, for the benefit of consumers and taxpayers - a level 
playing field where special treatment is not for sale.  (Once upon a 
time this was the Republican Party.  Nowadays it may be the Libertarian 
Party - of which I am currently Oregon state chair.)  Only a political 
party with an unshakable commitment to free minds and free markets will 
have the strength and longevity to fight consistently, and in the long 
term win.

-- Thomas B. Cox   
    Cox Business Consulting
     cell: 971-570-4933

© 2004 Thomas B. Cox