Taxes and regulations hurt people not 'business'

There is little more irritating than being told that some new tax or regulation "Will cost business £x" – all the more so if it is preceded by the word "only". The aim (usually of those who are promoting the new taxes or regulations) is to suggest that only a few people whose lives revolve around owning and running businesses will suffer, while the rest of us, normal people, will benefit. And of course being capitalists, the losers can afford it anyway. And being greedy capitalists, they deserve to pay anyway.

But taxes, tariffs, quotas, regulations, licences, trade restrictions and all the rest do not cost business. They cost people. People like you and me, even those of us with no business interests. And they cost us far more than the £x price-sticker suggests. Let me explain.

In the first place, businesses themselves, and the people who own and run them, are not some alien species. Most businesses are small businesses, as small as one person, and most of a country's commerce goes through these small operations. Something that costs "business" in fact costs millions of these same people, from the local farmer to the budding software developer.

Second, business is an entirely imaginary concept. It means networks of owners, suppliers, workers, distributors and customers. That is, people. Something that costs "business" in fact costs all of these individuals And it is not necessarily the owners who bear the bulk of the cost. An increase in business taxes, for example, is borne primarily by the workers and customers. Ordinary folk like us.

If you tax or regulate something, you will get less of it. That goes for business too. Unfortunately, the whole purpose of business is to create value and to produce the things we want to consume. Indeed, the only reason we go to the effort and expense of producing things is to consume them. Less business means that less value is created and there is less to consume. We get less of the things we value, less of what we want.

So customers lose. They may not be able to purchase the things they want, or those things may become more expensive because of the tax and regulation on their production. And here is an important and overlooked point: customers lose far more value than the £x that is lost to "business". The reason is simple: customers do not buy something unless they think its value to them is greater than the price they paid for it. Which means that something that costs "business" costs consumers more.

But perhaps the biggest worry is that all these effects are cumulative. Commerce lost today means fewer opportunities for investors, workers and customers. So there is a smaller base for value-creating opportunities tomorrow. And that in turn shrinks the opportunities available the next day, and the next. 

Taxes and regulations may be deemed necessary. But they have a lasting, expanding cost. And that accumulating cost falls on all of us, not just "business".