You don’t need me to tell you that it’s election season. Turn on your TV and you’re either going to hear about midterms or floods. But this year seems a little different. We’re seeing a lot of socialist candidates winning elections. Many cities have elected socialist mayors and a bunch of socialist upstarts are defeating establishment candidates.
This drove me to do a little research. First, I wanted to find out why this was gaining momentum, and what socialism could mean for small businesses. For the record, as small business owners, FCNews is no different than you combatting the challenges every small business faces on a daily basis. (Full disclosure: I favor a capitalist society where the goal is to make as much money to afford us the best lives possible.)
So what’s fueling this socialist movement? The biggest reason: Many young Americans feel the economic system isn’t working for them. Housing, health care, college, childcare and basic living costs have risen substantially, while many younger people feel that owning a home, building wealth and achieving the same standard of living their parents had is increasingly difficult.
A recent 2026 poll of 18-34-year-olds found 96% were concerned about living costs, with 40% saying they were “extremely” concerned. That creates fertile ground for a message that says: “The system is rigged. Government should make sure people can afford housing, health care and a decent life.”
When younger Americans say they like socialism today, many are thinking about universal health care, affordable housing, free or subsidized college, 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 2025 Harvard Youth Poll found only 39% of young Americans supported capitalism.
But let’s say all of a sudden this country turned from a capitalist society to a socialist one. How would this impact a typical floor covering dealer? I came up with four major ways:
1. Taxes: A more aggressively progressive administration could try to raise taxes on higher-income individuals and profitable businesses. The effect would be particularly noticeable to an owner who earns $250,000-$1 million+ from the business; operates as a pass-through entity; wants to sell the business; owns the building in which the business operates; or is trying to reinvest profits into expansion.
2. Labor costs: A more aggressively pro-labor administration could push for higher minimum wages, expanded paid leave, stronger overtime requirements, greater employee protections, easier unionization, scheduling protections and higher employer contributions to benefits.
3. Rent and real estate: A progressive government could pursue policies involving 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 regarding labor, environmental standards and consumer protections.
Let’s put all this into practice. How might this affect a flooring retailer doing about $5 million a year? I called on everyone’s new best friend, ChatGPT, for some answers. These numbers are illustrative, but they 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 minus 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 is $75,000, software/accounting/legal is another $75,000, insurance is $70,000 and other overhead is $100,000. I’ve come up with an operating profit of $330,000, or a 6.6% operating margin.
Now, let’s introduce a strong socialist policy environment. Imagine a government that substantially increases wages, employee benefits, payroll costs, business taxes, paid leave, labor protections, compliance requirements and commercial-property costs while leaving private ownership intact.
Employee compensation is probably the biggest immediate impact. Suppose average compensation—including wages, payroll taxes and benefits—increases by 15%. The company’s current $910,000 becomes approximately $1,046,500. The problem is wage compression. If you raise the bottom of the wage scale, the employee making $25 wants a raise, too. That’s why a minimum-wage increase can ripple through an entire payroll.
Next, let’s look at benefits and paid leave. Imagine a government adding more generous paid family leave, additional mandated benefits and other employee protections. Let’s assume another $40,000 per year in incremental benefit/leave costs.
Then we have taxes. A strongly progressive government could raise business taxes or reduce preferential rates for certain small businesses. Let’s assume the company’s effective combined state/local business-tax burden increases by $35,000 annually.
Now, suppose additional labor reporting, scheduling requirements, legal compliance, HR administration and regulatory requirements cost the company $25,000 per year. Bottom line: The starting profit of $330,000 becomes $93,500. That’s a 72% reduction in operating profit. Nothing was confiscated, nothing was nationalized, the company still does $5 million in sales and is still profitable. But the owner’s economic reward for taking the risk has fallen dramatically.
I can’t believe the owner is going to sit there and accept that. He has three ways to respond:
1. Raise prices. But if competitors don’t raise prices as much, he could lose business.
2. Cut employees. Suppose he eliminates two positions and reduces other labor costs by $100,000. Profit goes back toward $193,500 but now fewer people have jobs and the remaining employees have more work.
3. Accept lower returns. The owner could simply accept making $100,000 instead of $330,000. But it changes the economic incentive to own the company.
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 are assuming this retailer operates on 45% margin. If it’s more like 37%, the same policy changes could push it very close to break-even. At that point, the owner starts questioning why he is taking the risk of owning a business.
