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Response to TampaAnimusVortex (Reply #45)

Sat Dec 19, 2015, 05:51 PM

49. Please cite an economist who supports this idea?

Besides the empirical evidence that corporations do not in fact pass tax increases on to consumers, I think the common-sense logic you're leaning on is problematic.

They could have undercut their competition using those methods before the tax. Not relevant to the issue.


Well of course it's relevant. The fact is corporations en masse are not operating on some simplified ideal of the way competition or capitalism works, where anyone can just raise prices to try to make up for tax payments.

What the studies show is the core of the fallacy here -- corporate taxes are not somehow ineffectual. They pay them; the government gets them. There is no sort of free market magic bullet that locks consumer prices to corporate tax rates so the company never has to actually pay more.

I guess if you assumed all corporations are operating at perfect efficiency, in a uniform marketplace, with a static demand, and identical competitors, where all product pricing was locked to a rigid formula, you could make a theoretical case, but none of those assumptions are valid.

Think about it. Widget Co.'s taxes go up, so you automatically raise prices because your company can't survive without the precise level of net proceeds it currently has? Do you even need to do anything? What if your competitor is fine with simply paying more? What if they do want to compensate, but do it in another way? What if they are domestic / foreign and are taxed in a different way? What if people just don't want widgets at the higher price you think you require?

The whole thing extrapolates from conditions that don't exist. I guess you can argue that at some level, under some conditions, increased corporate taxes impact consumer pricing. But that's not the same thing as arguing that corporate tax levels are meaningless because corporations don't really "pay" taxes due to precisely passing them all along to consumers.

They might want to, or argue they're entitled to, but the reality is that they can't.

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