Here is a way to look at your example:
Level 1: Hot Dog Packer, manufactures hot dogs and sells to
Level 2: Fred's Hot Dogs, who buys the hot dogs and resells them without adding any value for 33% higher to
Level 3: John's Hot Dogs, buys the hot dogs and resells them without adding any additional value for 33% higher to
Level 4: George's Hot Dogs, buys the hot dogs and resells them without adding any additional value for 33% higher to
Level 5: Johnny's Really Good Dogs, who buys the hot dogs and sells them without adding any additional value to the end consumer for 33% more than he paid.
And remember that at each step of the way none of these companies has any inputs except for the hot dogs they buy-- no buildings, employees, phones, trucking charges, etc. Plus each of them is a C-Corp paying max corporate income taxes.
Try the examples with some real numbers (site_test has done this, he can probably show his example) and the accumulated tax numbers are much much lower. It is of course unreasonable just from a common sense point of view that these numbers could get as large as your example shows.
The pigdog example just shows that when you put garbage into a spreadsheet, garbage can come back out.
The pigdog example just shows that when you put garbage into a spreadsheet, garbage can come back out.LOL!! Yea, you make a purchase for resale, mark it up 33% THEN add 25% of the mark up for tax making the total markup 41% but only paying tax on 33% markup...No wonder he fears the IRS...LOL!!! What a maroon!
BTW, if the hotdog had so much value why wouldn't "Level 1: Hot Dog Packer" sell directly to "Level 5: Johnny's Really Good Dogs" for the higher price?
I'm not sure who the bigger fools are, the hotdog buyers/sellers, the moron who made the scenario, or the morons who accept it as a valid example.