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To: Principled

Business income taxes of 90% would not affect pricing decisions other than accomodating elasticities. If you believed you had to increase your price to account for the tax you might conclude that there was no way you could increase your price that much because the elasticity of demand is such that it would cause your sales to drop drastically thus it could mean you would LOWER the price to prevent demand from falling too much.

Business taxes of 90% would drastically impact the ability to invest since profits are the source of investment funds.
That would be the principle impact of so high a tax rate.


251 posted on 12/22/2005 12:54:39 PM PST by justshutupandtakeit (Public Enemy #1, the RATmedia.)
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To: justshutupandtakeit

"Business income taxes of 90% would not affect pricing decisions other than accomodating elasticities. If you believed you had to increase your price to account for the tax you might conclude that there was no way you could increase your price that much because the elasticity of demand is such that it would cause your sales to drop drastically thus it could mean you would LOWER the price to prevent demand from falling too much."

Business taxes suddenly going up to the 90% level would typically mean that previously profitable businesses would now be unprofitable, all other things considered. If the taxes affected all businesses in a given market equally, then those businesses would attempt to increase their prices to pass those costs along and remain at least marginally profitable. If the market would not bear that price increase, then these unprofitable companies would go out of business.


289 posted on 12/22/2005 7:57:58 PM PST by phil_will1 (My posts are in no way limited or restricted by previously expressed SQL opinions)
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