Cal West Apartments’ President, David Malcolm, is a well-established businessman in the real estate sector. Over his 50-year career, he’s been involved in transactions with a cumulative value exceeding $4 billion.
Throughout this time, Malcolm has observed the complex dance between business and government.
For instance, Malcolm knows that government regulations like minimum wage hikes and mandated benefits can seriously harm companies, even leading to bankruptcy. But he also recognizes that without government interventions like Small Business Administration loans and the pandemic-era Paycheck Protection Program, many businesses would have never gotten off the ground or shuttered long ago. It’s a constant back-and-forth relationship.
In a recent Fast Company article, Malcolm expertly discussed this relationship and how the government and businesses can better collaborate in the future.
When the Government Gets in the Way
To start, Malcolm was sure to stipulate exactly what the government receives in this dance: taxes. As he put it, “Local, state, and federal governments receive most of their revenues from taxes. … While only 6% of U.S. tax revenue comes from corporate taxes, 42.1% comes from individual taxes, largely income taxes. Businesses create the jobs that provide the income that ends up being taxed.”
It is clear that one of the most substantial ways governments hinder businesses is through tax policies. Higher taxes mean lower margins. Other harmful forms of intervention Malcolm touched on include rent control and eviction protection (specifically in real estate), and mandated employee benefits.
“Mandated benefits … can have unintended consequences. Sure, they are good for workers, but what if their employers shut down?” he wrote.
When the Government Helps
Malcolm noted that there are also several instances in which government intervention benefits businesses and their employees. For instance, many businesses simply could not have survived the COVID-19 pandemic without assistance from the federal government.
Just as important is the fact that without collaboration between private businesses and the government, innovation would likely be severely stunted.
“Consider Elon Musk’s SpaceX and its working relationship with the National Aeronautic and Space Administration (NASA),” Malcolm wrote. “NASA has provided SpaceX with important information and government funding, leading to breakthroughs in space travel and discovery. If Musk’s vision of a civilization on the Moon or Mars is realized, this partnership could be key.”
Regulation, Innovation, and the Way Forward
With innovation comes intense forms of regulation. Malcolm noted in his Fast Company article that the European Union AI Act was introduced just last year as a means of ensuring artificial intelligence doesn’t get out of hand. Soon enough, the United States and Canada will most likely have similar AI regulations. The problem with such regulations is that they can also stifle the exact innovation they’re attempting to encourage.
According to Malcolm, the key is to work together. He envisions government bodies working alongside businesses and innovators so regulations do not become too harsh and quash important technological breakthroughs.
“It’s like the art of negotiating: the two sides must communicate, understand, and respect each other. If they can, they’ll reach a place where regulations and innovation harmonize,” he said.
Malcolm ended with one final sage word of advice. If the U.S. government truly wishes to see the country’s innovators flourish, it should repeal an existing regulation every time it introduces a new one. It’s all part of striking “that all-important balance.”
About David Malcolm
With a five-decade track record of excellence in the San Diego real estate industry, David Malcolm is the President of Cal West Apartments, which has provided financing and homes for thousands of residential and commercial clients. Malcolm has also served in several public service positions and is a generous contributor to many nonprofit organizations.
By Tom White