ANDYou don’t need me to tell you it’s election season. Turn on your TV and you’ll hear about midterms or flooding. But this year it looks a little different. We are seeing many socialist candidates winning elections. Many cities have elected socialist mayors and a group of upstart socialists are defeating establishment candidates.
This prompted me to do some research. First, I wanted to know why this was gaining momentum and what socialism could mean for small businesses. For the record, as small business owners, FCNews It’s no different than combating the challenges every small business faces daily. (Full disclosure: I am in favor of a capitalist society where the goal is to make the most money to afford the best life possible.)
So what is driving this socialist movement? The main reason: Many young Americans feel that the economic system is not working for them. The costs of housing, healthcare, college, child care, and basic living have increased substantially, while many young people feel that owning a home, building wealth, and achieving the same standard of living their parents had is increasingly difficult.
A recent 2026 survey of 18- to 34-year-olds found that 96% were worried about living costs, and 40% said they were “extremely” worried. That creates fertile ground for a message that says: “The system is rigged. The government should make sure people can afford housing, health care and a decent life.”
When younger Americans today say they like socialism, many think of universal health care, affordable housing, free or subsidized college education, higher minimum wages, stronger unions, paid family leave, higher taxes on billionaires, and government regulation of large corporations. At the same time, young people have become much more skeptical of capitalism. A Harvard youth survey conducted in 2025 found that only 39% of young Americans supported capitalism.
But let’s say that suddenly this country went from a capitalist society to a socialist one. How would this affect a typical floor covering distributor? I came up with four main ways:
1. Taxes: A more aggressively progressive administration could try to raise taxes on higher earners and profitable businesses. The effect would be particularly noticeable for an owner who makes between $250,000 and $1 million or more from the business; operates as a pass-through entity; wants to sell the business; owns the building in which the company operates; or is trying to reinvest its profits in expansion.
2. Labor costs: A more aggressive pro-labor administration could push for higher minimum wages, expanded paid leave, stricter overtime requirements, stronger employee protections, easier unionization, schedule protections, and higher employer contributions to benefits.
3. Rental and real estate: A progressive government could implement policies that include commercial rent regulation, commercial property taxes, stronger tenant protections, restrictions on landlords, zoning changes, and higher taxes on commercial real estate.
4. Regulation: A socialist administration could increase regulation, particularly in labor matters, environmental standards and consumer protection.
Let’s put all this into practice. How might this affect a flooring retailer that makes about $5 million a year? I called up everyone’s new best friend, ChatGPT, to get some answers. These figures are illustrative, but are designed to resemble the economics of a real flooring company.
Our hypothetical $5 million flooring company has a gross profit of $2.25 million, assuming a gross margin of 45%. (Sales of $5 million less cost of goods of $2.75 million. Yes, I’m optimistic.) Let’s say salaries and wages are $700,000, payroll taxes and benefits are $210,000, sales commissions are $250,000, rent is $180,000, advertising/marketing is $80,000, freight/delivery is $180,000. vehicles/travel costs $75,000, software/accounting/legal costs another $75,000, insurance costs $70,000, and other overhead costs $100,000. I have made an operating profit of $330,000, or an operating margin of 6.6%.
Now, let’s introduce a strong socialist political environment. Imagine a government that substantially increases wages, employee benefits, payroll costs, business taxes, paid leave, labor protections, compliance requirements, and business property costs, leaving private property intact.
Employee compensation is probably the biggest immediate impact. Suppose average compensation (including salaries, payroll taxes, and benefits) increases by 15%. The company’s current $910,000 becomes approximately $1,046,500. The problem is salary compression. If you raise the minimum on the pay scale, the employee who makes $25 will also want a raise. That is why an increase in the minimum wage can affect the entire payroll.
Next, let’s look at benefits and paid leave. Imagine a government that adds more generous paid family leave, additional mandatory benefits, and other employee protections. Let’s assume another $40,000 per year in incremental benefits/licensing costs.
Then we have taxes. A strongly progressive government could raise business taxes or reduce preferential rates for certain small businesses. Suppose the company’s effective combined state/local business tax burden increases by $35,000 per year.
Now, let’s say that additional labor reporting, scheduling requirements, legal compliance, human resources management, and regulatory requirements cost the company $25,000 per year. Bottom line: The initial profit of $330,000 becomes $93,500. That’s a 72% reduction in operating profit. Nothing was confiscated, nothing was nationalized, the company still has a turnover of five million dollars and is still profitable. But the owner’s financial reward for taking the risk has decreased dramatically.
I can’t believe the owner is going to sit there and accept that. You have three ways to respond:
1. Raise prices. But if competitors don’t raise prices as much, you could lose business.
2. Cut employees. Suppose you eliminate two positions and reduce other labor costs by $100,000. Profits return to $193,500, but now fewer people have jobs and the remaining employees have more work.
3. Accept lower returns. The owner could simply agree to earn $100,000 instead of $330,000. But the economic incentive to own the company changes.
A flooring retailer is particularly vulnerable because labor is everywhere in the business. A government policy that increases the cost of labor affects almost every step.
And remember, we assume this retailer operates on a 45% margin. If it gets closer to 37%, the same policy changes could put it much closer to breaking even. At that point, the owner begins to wonder why he is taking the risk of owning a business.