What's wrong with business taxes? For starters, businesses don't pay them, we do.

What’s wrong with the idea of taxing businesses more in order to clean up the messes they create, to create more jobs and ease the burdens on individual taxpayers?

The reason this is wrong should be obvious, but apparently it’s not.

Well, business taxes, every penny of them, are passed on to the consumer and thus are translated into consumption taxes.

That’s right, business taxes are, after all is said and done, merely another cost of doing business, and every cost is passed on to the consumer in the final price of the item.

All the costs of doing business are passed along to the consumers (you and I).

That’s right, you and I pay ALL the costs related to a company’s doing business.

A businesses profit margin can’t be calculated until all the costs involved in that business are added up. All costs, every one of them are considered the costs of production...that’s right including taxes. So when it comes to business taxes – you and I, as consumers, pay them all.

Say I build decks on homes and say the raw materials - the lumber, nails, moorings cost me $800 and the labor involved costs me another $1,000. The cost of those items includes the sales taxes I pay on them. If I want to make a profit of $700 per deck, I can’t just add $700 to the $1,800 in raw costs, because I must consider the taxes on that profit. The final retail cost will be closer to $2,800 than $2,500 in order to make that $700 profit.

So who pays my taxes?

That’s right, the buyer does.

What if the local government decides to levy a “Luxury Tax” of say 20% on all such decks?

OK, I take the current $2,800 retail price and add that 20% and figure what retail price will bring me that same $700 profit. It comes out to $3,500 as $3,500 minus 20% or $700 leaves that original $2,800.

Again the consumer pays that tax. Do business taxes effect the business at all?

Sure they do.

Higher prices usually reduce demand.

That makes sense, right? Does that hurt the “greedy businessman?” Oh, it hurts far more than just the businessman, it hurts all those workers who depend on those deck building jobs, as lower demand = less business and less need for labor.

Consumers also suffer because of the higher prices they’re forced to pay or the home improvements they’re forced to forego.

With lowered demand and fewer sales, the government actually collects less in taxes.

So, in the end, everyone loses and moreover government fails in its primary purpose, facilitating the unfettered flow of free commerce.

There can be no more basic purpose for government than that. For only increased commerce creates increased opportunities.

In a free and open market, the more that is produced, the more the economic pie grows. Only a government controlled economic system is static – the more one takes out, the less there is or everyone else.

So why do so many people see business as the enemy?

Either envy or misunderstanding, or perhaps a combination of both.

In truth there is no such thing as too much profit. If a business price gauges, its competitors will undercut those inflated prices and either force that business into a competitive pricing structure, or out of business.

If a business produces such superior products that consumers are willing to pay more than they would for the products of its competitors, no one is hurt. Those that can afford the best will be able to access those products at higher prices and those that can’t will be able to afford cheaper knock-offs.

Those who see business or commerce as the enemy, fail to understand that commerce is the basis for contemporary human organization. Our cities, our civic organizations, our society is held together by the glue of commerce. It provides for everything – our food, clothing, shelter, our livelihoods and our government.

So what’s the purpose of the “Business Tax?”

There is none.

It is, at best, a “feel good” response to commerce. A tip of the hat to those who see business as the enemy.

Ironically enough, it turns out, in the end, not even to be a “business tax,” it’s a tax that is ultimately passed onto the unwary consumer.