In article , "Ash Wyllie" writes:


Owners through pass through taxes, and customers as a part of the price they
pay for goods and services.

Only if management can pass on the taxes. GM has enough trouble getting
current list price for its cars. Getting people to pay more would be
difficult.


That is a misconception about the relationship between supply and demand. We
all understand the demand side in the control of prices, but cost provides a
floor for supply. If it costs a manufacturer $12K to build a car, other than
for very grief periods, the supply of $11K cars will be zero. Making cars to
selll for less than cost, absent a government subsidy, is pointless. In fact,
making a car for less than cost PLUS a real profit less than available from
other investments is pretty much pointless. So, low demand, in the long run,
cannot drive the price down below a floor of cost plus a reasonable profit.

If something happens to raise cost for one manufacturer only, like a class
action suit or major recall, then that manufacturer suffers a competitive
disadvantage since he cannot pass that along to customers beyond the limits of
brand loyalty. But if something happens that raises the cost equally for ALL
manufacturers, like a rise in the cost of steel or a tax increase, that raises
the cost floor, and prices, regardless of demand.

All manufacturers are subject to the cost of corporate taxes, and the taxes
paid by their employees, and the taxes of their suppliers. All these taxes
contribute to the floor cost of producing goods and services below which low
demand cannot drive the price.

This is just as true for personal taxes. If the government were to impose a 20%
surtax on dentists incomes whose last names were in the first half of the
alphabet, I (Tabor) would be able to live well doing fillings at a price below
that which those dentists could get by on. But if you applied that surtax to
the incomes of all dentists, you're going to pay more for fillings, as we would
all raise prices to maintian our standard of living, otherwise why be a dentist
instead of a CFI?

Now apply that principle to everyone else who is not a dentist, but who sells
their labor to someone else, either directly or through an employer. Raise
income taxes on anyone, and all prices, for everything they contribute to
providing, go up. It is unavoidable. Income based taxes, either corporate or
personal, inevitably result in higher prices as they are passed on to the
consumer. Owners of businesses may serve as temporary buffers for tax
increases, but only briefly, or business comes to a halt. In the end, ALL
income based taxes actually impact our lives as a hidden sales tax paid by end
consumers, and those who appear to pay the income taxes are really only tax
collectors of this totally regressive, hidden sales tax.

Once the general public realizes that, class warfare over taxation becomes
pointless. Raising taxes on the baker effects everyone who eats bread. That is
the point of the FairTax (www.FairTax.org) effort, to bring that clarity to the
political process.

Don

--
Wm. Donald (Don) Tabor Jr., DDS
PP-ASEL
Chesapeake, VA - CPK, PVG