It is so stupid to overtax small businesses. More than any other, small businesses must pass on their costs, including their tax costs.
If Lucy sells lemonade for a dime a cup and her costs are a nickel, she makes a nickel in her one person business every time she sells a cup. That is her profit she pays herself from.
If the city imposes a nickel tax per cup on drinks, what does Lucy make?
Zero.
What are Lucy’s choices?
1. Go out of business.
2. Raise prices to cover the tax.
More likely, on top of the tax, the city would slap Lucy with a bill for a business license and a stiff fine for operating without one that means she would have to sell thousands and thousands of cups before she can even break even.