I missed this post earlier.
Your fundamental misunderstanding is that you believe profit (and thus the tax on it) is an expense/cost of production. It is not. Those costs are cost of labor, cost of materials, cost of capital (which includes fees and governmental costs: licenses etc.) There is no catagory of cost which includes income taxes. When your accountant prepares you tax return he does not include income tax as an expense.
And no economist will support the claim that profit is a cost.
Your practice is flying by the seat of your pants. Theory is derived from gathering information from many more sources and extracting the essence from them.
When my accountant tells me how much I owe in taxes, does that amouint reduce my net return?!
No, you have that wrong. You accused me of same above - used "repeastedly" even. I asked you to show me where I said that. You have not done so.
"Your fundamental misunderstanding is that you believe profit (and thus the tax on it) is an expense/cost of production."
Your fundamental misunderstanding is the inability to distinguish between profit and tax EXPENSE. They are not indistinguishable, your efforts to pretend otherwise notwithstanding. There is both pre-tax and post tax profit, but neither is inseperable from tax EXPENSE.
"When your accountant prepares you tax return he does not include income tax as an expense."
When an accountant prepares a tax return, it is for the sole purpose of determining what the taxes due are. What you are saying is that income taxes are not a deductible expense for tax computation purposes. Well, DUUUUH!! I wonder why.
I would direct your attention to the second page of Intel's annual report, more specifically the second page, which is the income statement, and even more specifically to the three lines entitled "income before taxes, provision for taxes, net income".
http://www.sec.gov/Archives/edgar/data/50863/000089161805000821/f12965e10vq.htm
Please also note that the income statement starts with net revenue and subtracts a number of expense items to arrive at the bottom line - net income. One of the items that is SUBTRACTED is "provision for taxes". By definition, anything that is subtracted from revenue to arrive at net income is an EXPENSE.
Can we make this any clearer, hardhead? This stuff isn't nearly as hard as you are making it.