However, by doing so, those same policies impose difficulties upon entrepreneurs who want to launch or run small businesses. The difficulties come in the form of more taxation and regulation. Taxation reduces the amount of money available to start and expand a business, while regulation increases the cost of doing so.

Therefore, come the socialists, and consequently the average entrepreneur faces higher costs of starting a business due to regulation, and having less funds to do so due to taxation.

This necessarily means that fewer people are now able to start (or expand) a business. Who are the people who can no longer do so? Those with a smaller income and fewer funds.

Large businesses are better positioned to absorb the costs of compliance with regulations and therefore those costs fall disproportionately on small business.

“Thank you very much for weeding out our competition, Mr. Socialist,” say large, rich corporations as they see those with less financial resources drop out of the race.

This is why so many wealthy individuals such as Bill Gates and Warren Buffet support socialist policies. They simply won’t be adversely affected. Now that they are already filthy rich, why would they care if it’s more expensive to start a money making venture?

But can’t this distortion be fixed with progressive taxes?

The answer to that is no because of the following:

The highest income tax bracket is always set quite low relative to the highest incomes earned. Currently (2009) it’s set at $372,950, while there are individuals with incomes in the many millions.

And if taxes are made more and more progressive, this will then only allow fewer and fewer, wealthier and wealthier individuals to have enough resources to start a business. Until one day, the multi-billionaires Bill Gates and Warren Buffet are the only ones who can afford it.

Does this seem like a fair society to you, where only a few are wealthy enough to prosper even more? It sure doesn’t seem fair to me. The only way to “fairness” then, is to make it impossible for anyone to prosper. Oh, wait, I think they already tried that in the Soviet Union, and it didn’t go too well.

But won’t the government take the tax money collected form the rich and use it to promote small business?

Perhaps a small fraction, but nothing even remotely close to what’s taken away from existing and potential businesses. Government is far too busy spending money on politically worthy projects (those projects that advance the politicians’ careers) to figure out what’s good for business. There’s Medicare, Medicaid, welfare, food stamp, bridges to nowhere, wind turbines, bailouts of gigantic failed corporations, and other forms of government waste.

Conclusion

Do support socialism and vote for socialist politicians If you want a society where only a small oligarchy controls nearly all the wealth, preventing anyone else form penetrating their small privileged circle. Note that this is exactly what the socialists say about capitalism. However, as usual, socialist policies have the opposite effects form their stated intentions.