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And what, exactly, does it illustrate. It doesn't illustrate that business taxes or tax costs or whatever they're called today, cascade - because they don't.

Okay, if those tax costs are not passed down the supply chain, where do they go? They just magically disappear into the ether beacuse they're not being levied on a direct retailer?

Maybe Milton Friedman

Maybe Miltion thinks it's such an obvious point it needs no explanation. Perhaps you should ask him?

Okay, if those tax costs are not passed down the supply chain, where do they go? They just magically disappear into the ether beacuse they're not being levied on a direct retailer?

The incidence of the corporate tax is one of the mysteries of economics. It can be borne by labor, capital, or consumers. Of the studies I've read, I can't remember one that says it is borne by consumers. Most say the incidence is on mainly capital (the investors), but may be shifted to labor (through lower wages).

Alan Auerbach recently wrote "Who Bears the Corporate Tax? A Review of What We Know." It gives a good overview of where the thought currently is on corporate tax incidence.