There is something Capraesque about progressive antitrust writing. Recently in The New York Times, Lina Khan waxed rhapsodic about Democratic mayoral candidate Zohran Mamdani as he stops by halal carts and pops into bodegas to ask small business owners about their problems. Khan’s writing – like that of former progressive FTC Commissioner Alvaro Bedoya – is poetic in evoking the plights and virtues of the small dealer. Reading Khan, one imagines the small grocer urging you to bite into one of his crisp apples while his granddaughter sweeps the floor, or the guy in the food truck bragging about his chicken empanadas. You get the sense that every time their doors open and the little bell rings, an angel gets its wings.
For Khan, the former chair of the Federal Trade Commission and one of the most aggressive regulators in U.S. history, these virtuous small business owners are threatened by the Mr. Potter’s of big, consolidated, powerful corporations. From 1980 to 2020, Khan writes, the small business sector shrank. What is needed is aggressive antitrust to “check the power of big business” and for Democrats to fight “for a level playing field.”
Khan blames Ronald Reagan and Bill Clinton for “big is better” antitrust policies that allowed small business owners to get hemmed in by predatory corporations. But her narrative gets it backwards. For the most part, it isn’t large corporations stifling small businesses. They bring in the employees who frequent these businesses at lunchtime. The real threat is the kind of big government that Khan and Mamdani represent. In 2018, the Manhattan Institute reported that in New York City, small businesses were governed by more than 6,000 rules, 250 licenses and permits, under 15 agencies. Nearly one-third of these businesses reported waiting six months or longer to obtain necessary approvals from the city to open their shops. Restaurants needed 30 permits, registrations, licenses, and certificates, followed by 23 separate inspections, to open their doors. Despite efforts by Mayor Eric Adams, small businesses in New York are still drowning in permits and rules.
Then there are the city and state taxes.
These small businesspeople pay more than 3 percent of their income to the city. This is on top of state rates that range from 4 percent to 10.9 percent of one’s income. Then there are the state’s corporation franchise and LLC taxes. Sole proprietors get to pay their business income in the form of their personal state income tax – again, up to almost 11 percent of what they earn.
Since 1980, there has in fact been a 54 percent increase in small businesses. If the share of U.S. GDP dedicated to small business is, in fact, shrinking, could it be due in part to the liberal addiction to bureaucracy, paperwork, regulations and taxes?
If this is so, small business should dread the election of a Mayor Mamdani. He has shown little enthusiasm for cutting red tape. But he has promised to turn over the ownership of grocery stores to the government. It is hard to imagine under those circumstances the friendly grocer offering you a free apple. That might actually constitute a crime. Moreover, adding grocery stores to the city’s budget will surely entail hundreds of millions of dollars in new costs. Where will that money come from? It can only come from raising the city’s personal income tax, as well as other taxes and fees (water hookups, corporate filings, etc.) that small businesses pay.
“Business owners enjoy the freedom and self-determination that come with being their own boss and the sense of stewardship that comes with knowing the buck stops with them,” Khan writes. Wonder how that will work out for grocers, once they are city employees?
Then there is the matter of rent. As Swedish economist Assar Lindbeck once observed, rent control is one of the most efficient techniques to destroy a city – except for bombing. Rent control has long prevented the construction of needed housing in New York. Mamdani’s promise of a rent freeze would also freeze out incentives for new building, while leading to massive closures of some properties, and horrible conditions in others. This would hurt, not help, the halal guy and the bodega owner.
Khan’s writing echoes an 1897 Supreme Court opinion that declared that the purpose of antitrust is to protect “small dealers and worthy men.” I have no doubt that the men and women who own and run small businesses in New York are a worthy bunch. It takes a lot of pluck to deal with the hassles and harassments of living in one of the most heavily taxed and regulated spaces on earth.
They probably do need help. But the answers Khan and Mamdani promise are like throwing an anvil where lifebuoys are needed.
