The role of taxes.
We’ve talked a lot about taxes as revenue to the Government and the inefficiency of government spending on this Learning from Dogs, but a far more important issue is the impact of taxes on the costs and output of businesses.
Any imposed cost to business is a “tax,” whether it’s called that or not. And any tax is an additional cost to that business, which lowers its output, reduces employment, and raises prices of goods and services to you and me.
How does a manager or business owner decide on the optimal level of production? How does a manager decide whether to hire one more person, expand operations to a third shift, ship its product to a distant market, or to outsource?
By comparing the additional costs of that decision to the additional revenues it generates.
If the revenues cover the costs, then the manager forges ahead. If they don’t, the company can’t expand without incurring losses and eventually going out of business.
Our desire or need for goods and services, along with our ability to pay, creates demand. A company’s costs of production (labor + capital equipment) along with any taxes or fees imposed by local, state, and the federal government, create the supply.
The two sides — supply and demand — are totally independent of each other; they come from two entirely different places in the economy. But where they meet is where prices are determined: prices determine the revenue of business, and thus the level of costs that can be covered, and thus the level of production and employment and consumption that can be sustained by private industry.
Taxes are a REAL cost of doing business; they are a REAL drain on productivity, innovation, and entrepreneurship.
The press is spilling over with reports of new taxes being considered by Congress and the White House: Cap and Trade, Value Added taxes, increases in capital gains taxes, higher minimum wages, sin taxes, additional costs of health care…. each and every one of these taxes pushes up the costs of doing business, reduces the output of the economy, reduces employment, and raises the prices of goods and services. It squeezes the private economy, it suffocates entrepreneurship, kills commerce, and it idles people and factories and local businesses. It hurts everyone.
New taxes should be challenged and fought like our economic lives depended on it…..because they DO!
By Sherry Jarrell
Learning from Dogs 