8 magic assumptions about dollars paid to government by businesses:
1) Paying corporate income tax to government only reduces shareholders capital/earnings, and wages, but never increases consumer price.
2) Paying the corporate employer's excise to government only reduces wages.
3) Paying a vat to government only increases consumer price.
4) Paying retail sales tax to government only increases consumer price
5) Paying sales tax on manufacturers or distributors products to government only increases consumer price.
6) Paying any excise tax (except the employer's excise) to government only increases consumer price.
7) Paying corporate property taxes to government only reduces shareholder capital/earnings and wages.
8) Paying tariffs to government only reduces earnings of foreign producers.
9 magic assumptions made by Ancient_Geezer and His Merry Band of FairTaxers about dollars paid to government by businesses:
[OK. I made that last one up.]
9 magic assumptions made by Ancient_Geezer and His Merry Band of FairTaxers about dollars paid to government by businesses:
| Tax Incidence, Tax Burden, and Tax Shifting Who Really Pays the Tax Inconsistent Attribution and Sloppy Theory. Furthermore, the conventions used in tax analysis are often inconsistent from one tax to the next and fail to do a good job of demonstrating even the initial incidence of the taxes. In standard JCT burden tables, and in Treasury and CBO analytical work, consumption taxes are usually assumed to be “passed forward” to consumers in the form of higher prices. *** Snip *** Meanwhile, income taxes and other taxes on factors are assumed to be “passed backwards” to workers and owners of capital in the form of lower take-home pay and after-tax incomes from saving and investing. *** Snip *** Customs fees are an exception to this pattern. They are consumption taxes but are assumed (by the Treasury) to be borne by the suppliers of the foreign labor and capital that produced them. Consumption taxes, such as a retail sales tax, a VAT, or excise taxes, whether imposed on consumers or on manufacturers, are routinely described as being paid by consumers in the form of higher prices because it is assumed that consumers are less flexible than producers, so that consumer prices increase by an amount equal to the tax, with none of the tax borne by the producers of the taxed goods. It is as if the supply of goods and services were totally elastic, such that production would dwindle to zero if there were any reduction in the price received by the producers, so the consumers must foot the entire bill. *** Snip *** The distribution of the corporate income tax is so uncertain that it is left out of most burden tables but is thought to be borne mainly by either shareholders (at least in the short run) or workers (in the long run, as capital adapts). These taxes are described as if workers, savers, and investors offered their labor and capital in totally inelastic supply, undiminished in quantity, when the tax cuts their compensation. It is assumed that they make no demand for an increase in compensation in response to the tax, so they swallow the entire burden of the income and other factor taxes that they pay. *** Snip *** In effect, the analysts pretend that producers can shift consumption taxes onto their customers but must absorb income taxes placed on their own earnings. Supply is infinitely elastic and infinitely inelastic at the same time. This is an inconsistent approach to tax shifting that is at odds with both economic theory and real-world experience. In addition, neither approach deals with any further adjustments that occur in the real world when taxes are imposed and resources are shifted in response from one use to another. |