Unless you can show that those higher tax amounts reduced their profits by the same amount, then you haven’t addressed Bigun’s point.
If a business remits more in taxes this year but raised its prices such that it profit by even more, then the business passed along those higher taxes to its customers.
As long as the same taxes hit all competitors in a market, the taxes simply raise the prices. They have no effect on the profits of the businesses. Remove taxes and you lower prices, again having no effect on profits.
Free markets do not determine prices directly. To say that a price is set by what buyers are willing to pay is only true in the short term. In the long term, markets are created by the after-tax profit sellers require to offset the risk associated with participating in that market. That profit is what is left after other direct costs, taxes, risks, and inflation are taken into account. This establishes the minimum price the sellers will accept to stay in the market.
If that minimum price cannot attract buyers, then sellers will abandon the market, even to the point that the good or service completely disappears. If more than the minimum price is readily available from buyers, then more competitors will enter the market, increasing supply and lowering prices back down to the minimum.
EXXON MOBIL CORPORATION
FIRST QUARTER 2006
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(millions of dollars, unless noted)
First Quarter
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2006 2005
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Earnings / Earnings Per Share
Total revenues and other income(1) 88,980 82,051
Total costs and other deductions(1) 73,521 69,148
Income before income taxes 15,459 12,903
Income taxes 7,059 5,043
Net income (U.S. GAAP) 8,400 7,860
Net income per common share (dollars) 1.38 1.23
Net income per common share
- assuming dilution (dollars) 1.37 1.22
Other Financial Data
Dividends on common stock
Total 1,957 1,728
Per common share (dollars) 0.32 0.27
Millions of common shares outstanding
At March 31 6,050 6,366
Average - assuming dilution 6,126 6,421
Shareholders' equity at March 31 112,463 103,698
Capital employed at March 31 122,286 114,171
Income taxes 7,059 5,043
Excise taxes 7,664 7,238
All other taxes 11,049 10,944
Total taxes 25,772 23,225
ExxonMobil's share of income taxes
of equity companies 521 493