The Washington PostDemocracy Dies in Darkness

Opinion Small businesses like ours are the most vulnerable in lockdowns

People dine in the outdoor area of a restaurant in on May 29 in the District.
People dine in the outdoor area of a restaurant in on May 29 in the District. (Michael Reynolds/EPA-EFE/REX/Shutterstock)
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Lyle Albaugh is chief financial officer of Betsy Fisher, a women’s specialty store in the District. Donald J. Boudreaux is a senior fellow with the F.A. Hayek Program at George Mason University’s Mercatus Center.

For as long as we Americans have been Americans, we’ve complained about taxes. Many of us complain that tax burdens are too heavy, a few complain that tax burdens are too light, and nearly everyone complains about the distribution of the tax burden. Should it be more progressive or should it be flatter?

But no one complains that the tax burden is insufficiently regressive. Everyone opposes regressive taxes — that is, taxes that rise as incomes fall. But now, with the nation still coping with the effects of novel coronavirus-inspired lockdowns, we see that the heaviest burdens fall, cruelly, on those least able to pay.

Why are relatively few people complaining about the distribution of the economic burden of the government-imposed shutdowns? While the lockdowns aren’t literally a tax, they do involve — as do taxes — government commandeering of citizens’ resources to achieve some public purpose.

With taxation, government requires citizens to give up a certain portion of their incomes to pay for public goods. And under our system of progressive taxation, as incomes rise, the share of income taxed away also rises. Under this type of taxation, the heaviest burdens are borne by those most able to pay — that is, by the wealthiest.

That’s not the case with the shutdowns.

In this area, portions of Virginia, Maryland and the District are still under restriction — and may be for some time.

A poll by the Pew Research Center found that the nationwide lockdown caused more than half — 52 percent — of lower-income Americans to lose their jobs or have their pay cut. A smaller portion — 42 percent — of middle-income Americans suffered the same fate, while fewer than one-third of upper-income Americans are paying this toll.

The reason for the lockdown’s regressive effect is no mystery. Although there are exceptions to this rule, a disproportionately large number of highly paid workers, compared with lower-paid workers, have jobs that allow them to work from home.

For example, one of us (Boudreaux) is a college professor who continues to teach his classes online from home using Zoom. He remains employed with no cut in his income. Many architects, accountants, lawyers, financial planners and other upper-income workers enjoy similar opportunities.

In contrast, the other of us (Albaugh) co-owns and works full time at a small retail business in the heart of the District — a business that for more than 30 years has depended for the bulk of its sales on foot traffic. With his D.C. store shuttered by government decree, not only is he unable to work and earn income, but his commission-based employees are in the same sinking boat.

Small-business owners earn an average annual income of $69,158 — solidly middle-income. Most of their employees — workers such as retail clerks, waiters and cooks in restaurants, and janitors — earn less.

And workers such as these dominate one of the industries hardest-hit by the lockdown: tourism and hospitality. Droves of desk clerks, bellhops, maids, reservation agents, bus drivers, airplane mechanics and other lower- and middle-income workers are out of a job. Workers such as these shoulder the brunt of the lockdown’s costs — of its de facto taxes.

We do not pretend to be experts on the epidemiological merits of the lockdown. But we are distressed that this policy was imposed so suddenly — indeed, in a panic — and without sufficient public deliberation or apparent weighing of who would bear the majority of its costs. And among these costs are the lockdown’s inequitable regressivity and an inevitable increase in income inequality.

The $1,200 checks, the expansion of unemployment benefits and the emergency aid for small businesses do speak to a recognition that some citizens will suffer more than others from losing their ability to earn incomes. But those checks and measures are woefully insufficient and neglect certain portions of the population.

Every day of a lockdown means that fewer businesses will survive to employ those who were cast out of work, dimming the prospects of the least skilled who thrive only in a vibrant economy. The scale of this regressive lockdown will not be known for some time, but we all know who will bear it — and continue to bear it — even after the shackles are gone.

Read more:

Henry M. Paulson Jr.: 7 principles for a post-coronavirus economy

Fareed Zakaria: To solve the economic crisis, we will have to solve the health-care crisis

Jennifer Rubin: Reopening the economy won’t avert a serious recession