Fair Tax Act
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Fair Tax Act
It seems as if some Republicans agree with my ideas about taxes: https://reason.com/2023/01/11/house-rep ... upporting/
Re: Fair Tax Act
I read it, but saw a few things I would like to see done differently.
The main thing was the super high tax it was claiming it wanted.
All research I've ever seen regarding it, the taxes could be down around 5% or lower on retail sales for federal taxes.
I do see it hurting fixed income, namely seniors and the poor, worse than we have now. Especially if the so called prebate goes to everyone. If they can afford to pay a prebate, they don't need the extra percentages to do that. Just raise the SS checks by a little more than double of what they are now and the seniors would be happy, and cost the gov much less too.
I've always wanted a Flat Tax for individuals, and NO Taxes on businesses of any kind, because they don't pay it, the end consumer does.
The main thing was the super high tax it was claiming it wanted.
All research I've ever seen regarding it, the taxes could be down around 5% or lower on retail sales for federal taxes.
I do see it hurting fixed income, namely seniors and the poor, worse than we have now. Especially if the so called prebate goes to everyone. If they can afford to pay a prebate, they don't need the extra percentages to do that. Just raise the SS checks by a little more than double of what they are now and the seniors would be happy, and cost the gov much less too.
I've always wanted a Flat Tax for individuals, and NO Taxes on businesses of any kind, because they don't pay it, the end consumer does.
Re: Fair Tax Act
My proposal taxed income as opposed to this one which taxes purchases. I would include all businesses regardless of where they derive their income from (i.e. you and me) because that lowers the flat rate percentage by increasing the number of payers. The total tax bill remains constant no matter how the taxes are assessed, and I insist the bill per individual would be less if more people were paying.
The rate in the article is 23% and my guesstimate was 25%. The bill in congress would eliminate federal income tax only while my idea would eliminate all taxes. I also would not confine the new system to federal taxes alone. All taxes at the federal, state, county, and municipal level would be eliminated, which is why 25% would not be an outrageous amount even for us seniors on fixed income. The bill in congress would indeed be biased against low income folks, about 40% of the population, because the total cost of goods purchased would not be reduce very much if any. My all tax elimination would reduce costs across the board.
Neither my proposal nor the one forced upon Mc Carthy by the nut case Maga extremists is going to happen. Mc Carthy agreed to take a vote but he as well as those idiots proposing it all know it will never get past the Senate (assuming it gets out of the House), and certainly the president will get a good laugh out of it. Be that all as it may, there seems to be some momentum in thinking about a flat tax rate. I like that trend.
The rate in the article is 23% and my guesstimate was 25%. The bill in congress would eliminate federal income tax only while my idea would eliminate all taxes. I also would not confine the new system to federal taxes alone. All taxes at the federal, state, county, and municipal level would be eliminated, which is why 25% would not be an outrageous amount even for us seniors on fixed income. The bill in congress would indeed be biased against low income folks, about 40% of the population, because the total cost of goods purchased would not be reduce very much if any. My all tax elimination would reduce costs across the board.
Neither my proposal nor the one forced upon Mc Carthy by the nut case Maga extremists is going to happen. Mc Carthy agreed to take a vote but he as well as those idiots proposing it all know it will never get past the Senate (assuming it gets out of the House), and certainly the president will get a good laugh out of it. Be that all as it may, there seems to be some momentum in thinking about a flat tax rate. I like that trend.
Re: Fair Tax Act
Businesses already pay taxes on retail purchases which are not tax deductible.
It would be impossible to tax them on anything else, because it would cause hyperinflation overnight.
How many parts are in a car? And if you had to pay 25% tax for each and every part purchased and used in that car, no one on the planet could afford to buy that car.
Plus it would cause COMPOUNDED Taxes BIG TIME.
The company who makes radios has hundreds of components in it, purchased from many different sources.
Once the radio is assembled, it would be sold to a distribution company and taxed on that sale. Then when the distribution company sold the radio to a wholesaler, it would be taxed again, and when the wholesaler sold it to a retailer, it would be taxed again, and when the retailer sold it to a customer, it would be taxed yet one more time.
This would be worse than our current tax system if you chose to tax businesses on everything they buy to make stuff.
If all taxes were eliminated, such as property taxes as an example. The guy living in a tent is not using as many city resources as the guy living in his 10,000 sq. ft. mansion. Or should a local flat tax on everything be more than 1/2 the cities population can afford, and not the amount of anything the very rich.
I can see a Flat Tax working out very well at the Federal Level. They would end up with more money to waste than they get now, even at a very low tax rate of under 5%.
It would be impossible to tax them on anything else, because it would cause hyperinflation overnight.
How many parts are in a car? And if you had to pay 25% tax for each and every part purchased and used in that car, no one on the planet could afford to buy that car.
Plus it would cause COMPOUNDED Taxes BIG TIME.
The company who makes radios has hundreds of components in it, purchased from many different sources.
Once the radio is assembled, it would be sold to a distribution company and taxed on that sale. Then when the distribution company sold the radio to a wholesaler, it would be taxed again, and when the wholesaler sold it to a retailer, it would be taxed again, and when the retailer sold it to a customer, it would be taxed yet one more time.
This would be worse than our current tax system if you chose to tax businesses on everything they buy to make stuff.
If all taxes were eliminated, such as property taxes as an example. The guy living in a tent is not using as many city resources as the guy living in his 10,000 sq. ft. mansion. Or should a local flat tax on everything be more than 1/2 the cities population can afford, and not the amount of anything the very rich.
I can see a Flat Tax working out very well at the Federal Level. They would end up with more money to waste than they get now, even at a very low tax rate of under 5%.
Re: Fair Tax Act
My thoughts on taxing income are not the same as the convoluted accounting scheme you describe for taxing purchases. The article I referred to offers an exclusion for business purchases of equipment used to manufacturer their product. Re-sale of that equipment would be taxed. I don't like the idea of exceptions in taxes, but this one sort of makes sense.
Elimination of property taxes would benefit the wealthy more so than the poor only if the tax rates for each were different. In a flat rate system the costs of running a government are shared equally. The rich guy who is not paying taxes now will be partly paying for services the poor guy gets, and vice versa. The rate is the same for all people, rich or poor. The dollar amount, however, is significantly different. And, it is that dollar amount upon which the cost of running a government is calculate, not the rate of taxation.
Elimination of property taxes would benefit the wealthy more so than the poor only if the tax rates for each were different. In a flat rate system the costs of running a government are shared equally. The rich guy who is not paying taxes now will be partly paying for services the poor guy gets, and vice versa. The rate is the same for all people, rich or poor. The dollar amount, however, is significantly different. And, it is that dollar amount upon which the cost of running a government is calculate, not the rate of taxation.
Re: Fair Tax Act
Even the way you reworded it, it still wouldn't work for businesses, because they resell their product at each stage of the development of a final product done by other companies.
The ore mining company sells to the crushers. The crushers sell the extracted ore to the smelting company, the smelting company sells their ingots to the steel fabrication plants. Sheet steel is sent to metal benders and stampers to form a part of something else, like the fender of a car, or lid for a can. Etc. ad infinitum.
A Flat Tax should only be on individuals with an Income from labor, and from investments. Any and all income should have the flat tax on it.
Property taxes should not be included in the flat tax at all, those taxes are for locally provided services and the running of local governments. Even so, property taxes should be limited to a specific amount which would be equal for all folks who have land. But here we go with the exceptions again. Farmland should be next to zero, unimproved ground a small step up from that, and improved ground should have the highest tax rate. But none of those taxes should go to the Feds, only the State and County. Individual cities could not tax property unless they are an independent city, meaning their own county.
All state level income taxes should cease completely.
But there is much more to it than that, which is why coming up with something viable and fair to all would be next to impossible.
The ore mining company sells to the crushers. The crushers sell the extracted ore to the smelting company, the smelting company sells their ingots to the steel fabrication plants. Sheet steel is sent to metal benders and stampers to form a part of something else, like the fender of a car, or lid for a can. Etc. ad infinitum.
A Flat Tax should only be on individuals with an Income from labor, and from investments. Any and all income should have the flat tax on it.
Property taxes should not be included in the flat tax at all, those taxes are for locally provided services and the running of local governments. Even so, property taxes should be limited to a specific amount which would be equal for all folks who have land. But here we go with the exceptions again. Farmland should be next to zero, unimproved ground a small step up from that, and improved ground should have the highest tax rate. But none of those taxes should go to the Feds, only the State and County. Individual cities could not tax property unless they are an independent city, meaning their own county.
All state level income taxes should cease completely.
But there is much more to it than that, which is why coming up with something viable and fair to all would be next to impossible.
Re: Fair Tax Act
It seems to me that eliminating all taxes, including property taxes, is equitable. Everybody benefits the same amount from that. The tax on income would also be equitably in that everyone pays the same percentage of their income. The only difference would be in the rate at which the income was taxed at different levels of government. Countries are more expensive to run than, say, townships.
Listing the stages in a supply chain is simply stating the obvious. Every stage has income revenue and expenses. DUH If my tax plan is implemented each one of those processors will be paying the same rate of tax. In theory that is what is going on in the current economy but the taxes are on profits, not on income. By taxing profits there is a lot of room for manipulating the costs so that certain business entities (and individuals) appear to be operating at a loss and thus pay no taxes. While that is good for the business, it's bad for the rest of us tax payers who must make up the shortfall of cash required to operate the government. That could not happen under the scheme I envision.
Listing the stages in a supply chain is simply stating the obvious. Every stage has income revenue and expenses. DUH If my tax plan is implemented each one of those processors will be paying the same rate of tax. In theory that is what is going on in the current economy but the taxes are on profits, not on income. By taxing profits there is a lot of room for manipulating the costs so that certain business entities (and individuals) appear to be operating at a loss and thus pay no taxes. While that is good for the business, it's bad for the rest of us tax payers who must make up the shortfall of cash required to operate the government. That could not happen under the scheme I envision.
Re: Fair Tax Act
One flat tax based solely on income from all sources of income really would be the ideal way to go.
But again, only for individuals, not for businesses. The owners would pay income tax on the amount they draw for personal use.
OK, you are a vehicle business and buy a truck for resale for 150,000 dollars.
The company who sold you that truck would have to pay income tax on 150,000 dollars, the sale price.
You in turn sell the truck to the local shipping company for 200,000 dollars, so you have to pay income tax on the 200,000 dollars, because that is what you sold the truck for.
Let's say the flat tax you are talking about is 25%, that would make the tax 62,500 dollars.
How do you pay that out of the 50,000 you made from the sale, minus your purchase cost?
Curious minds want to know!
But again, only for individuals, not for businesses. The owners would pay income tax on the amount they draw for personal use.
OK, you are a vehicle business and buy a truck for resale for 150,000 dollars.
The company who sold you that truck would have to pay income tax on 150,000 dollars, the sale price.
You in turn sell the truck to the local shipping company for 200,000 dollars, so you have to pay income tax on the 200,000 dollars, because that is what you sold the truck for.
Let's say the flat tax you are talking about is 25%, that would make the tax 62,500 dollars.
How do you pay that out of the 50,000 you made from the sale, minus your purchase cost?
Curious minds want to know!
Re: Fair Tax Act
Your "curious" question is answered in the article I cited. Purchases for equipment needed to rum a company are not taxed unless the item was resold. Think of it as the difference between income tax and sales tax. The actual income on that $200,000 truck would be $50,000 (selling price minus purchase price) and at the 25% rate would amount to $12,500 which can easily be paid from the sales transaction alone.
I'll be honest here and say I have not thought out my taxing scheme in great detail. There are certainly some conflicting accounting circumstances that would need to be mitigated. Defining exactly what constitutes income would be necessary, for example. My position is that businesses are legal entities that benefit from the same government services as do individual citizens. It does not seem fair that those business entities should not be required to pay their fair share. In today's economy some legally do not. My reasoning is simple. There is but one total cost for running the government. That cost should be born equally by all participants in the system. Including businesses as equal tax payers would increase the number of payers and lessen the burden on each individual. Because what is fair and equal is based on income, it is effectively a means test. Low income people pay fewer dollars than high income people, yet the rate is the same for all.
I'll be honest here and say I have not thought out my taxing scheme in great detail. There are certainly some conflicting accounting circumstances that would need to be mitigated. Defining exactly what constitutes income would be necessary, for example. My position is that businesses are legal entities that benefit from the same government services as do individual citizens. It does not seem fair that those business entities should not be required to pay their fair share. In today's economy some legally do not. My reasoning is simple. There is but one total cost for running the government. That cost should be born equally by all participants in the system. Including businesses as equal tax payers would increase the number of payers and lessen the burden on each individual. Because what is fair and equal is based on income, it is effectively a means test. Low income people pay fewer dollars than high income people, yet the rate is the same for all.
Re: Fair Tax Act
Then it wouldn't be a Flat Tax if deductibles applied to it!
Best not to tax businesses on income or sales, except at the retail level where it is just finished goods changing hands to a consumer.
Tax on Income would be different than a Tax on Public Services, which is usually taken care of by property taxes.
Flat Tax the personal income of individuals, and leave the property taxes as they are, and you'll be off to a good start on simplifying our taxes.
Let's take a look at something simple here. A steel ingot.
John J. Sporting Company buys a steel ingot and makes horseshoes.
While A. J. Swiss Watch Spring Company buys the same steel ingot and makes mainsprings for watches.
Both of these companies paid the same price for the steel ingot.
Very little labor is used to make the horseshoes, while mega-tons of labor were required to make the mainsprings.
John J. could easily pay a flat tax and have enough money left over to run his business.
But A. J., due to the labor and time involved to make those mainsprings, even though they get more of them from the same steel ingot, the taxes on those mainsprings would be so high, it would drive the company broke in short order.
Best not to tax businesses on income or sales, except at the retail level where it is just finished goods changing hands to a consumer.
Tax on Income would be different than a Tax on Public Services, which is usually taken care of by property taxes.
Flat Tax the personal income of individuals, and leave the property taxes as they are, and you'll be off to a good start on simplifying our taxes.
Let's take a look at something simple here. A steel ingot.
John J. Sporting Company buys a steel ingot and makes horseshoes.
While A. J. Swiss Watch Spring Company buys the same steel ingot and makes mainsprings for watches.
Both of these companies paid the same price for the steel ingot.
Very little labor is used to make the horseshoes, while mega-tons of labor were required to make the mainsprings.
John J. could easily pay a flat tax and have enough money left over to run his business.
But A. J., due to the labor and time involved to make those mainsprings, even though they get more of them from the same steel ingot, the taxes on those mainsprings would be so high, it would drive the company broke in short order.
Re: Fair Tax Act
Material cost to manufacture one horseshoe = $0.50
Horseshoe sells for $1.00
Qty sold per ingot of steel = 100
Income from sales = $100
Flat tax = $25.00
Material cost to manufacture one watch spring = $5.00
Spring is p/o watches sold for $100
Qty sold per ingot of steel = 10,000
Income from sales = $1,000,000
Flat tax = $250.000
Since for some reason we are comparing ingots to ingots it's reasonable to break it down by how much revenue is derived and taxes paid per ingot of steel.
The cost of manufacturing a product is irrelevant in my taxing system. It's assumed all businesses are structured to make a profit, and the only function of that profit goal is to set a fair market selling price, or income. I think the horseshoe maker needs to raise his prices, but the watch maker clearly has no problem covering the cost of steel.
This is a good example of what I'm talking about being fair. The blacksmith is a one (maybe two) man family owned business which consumes minimal government services. The watch maker has a large factory, lots of workers, many sources for necessary material and tools, and consumes a lot more government services than the smithy. Thus the larger consumer of government services is paying a larger dollar amount, but at the same rate as the small business. If neither one of these businesses paid taxes, guess who would be stuck with the bill.
Horseshoe sells for $1.00
Qty sold per ingot of steel = 100
Income from sales = $100
Flat tax = $25.00
Material cost to manufacture one watch spring = $5.00
Spring is p/o watches sold for $100
Qty sold per ingot of steel = 10,000
Income from sales = $1,000,000
Flat tax = $250.000
Since for some reason we are comparing ingots to ingots it's reasonable to break it down by how much revenue is derived and taxes paid per ingot of steel.
The cost of manufacturing a product is irrelevant in my taxing system. It's assumed all businesses are structured to make a profit, and the only function of that profit goal is to set a fair market selling price, or income. I think the horseshoe maker needs to raise his prices, but the watch maker clearly has no problem covering the cost of steel.
This is a good example of what I'm talking about being fair. The blacksmith is a one (maybe two) man family owned business which consumes minimal government services. The watch maker has a large factory, lots of workers, many sources for necessary material and tools, and consumes a lot more government services than the smithy. Thus the larger consumer of government services is paying a larger dollar amount, but at the same rate as the small business. If neither one of these businesses paid taxes, guess who would be stuck with the bill.
Re: Fair Tax Act
OK, let's try it this way then. You are a car dealer who buys a car for 35,000 dollars and sells it for 40,000 dollars.
Based on your Flat Tax system, they owe taxes on the sale of 40,000 dollars @25% that would be 10,000 dollars in taxes.
The company the dealer bought the car from for resale must also pay the 25% tax on the sale, so that's another 8.750 dollars.
Trickle down the materials costs to each of the vendors, and the taxes collected on that car could end up being over 500,000 dollars to the government.
But lets look back at the poor dealer who lost 5,000 dollars more than the profits on the car sale.
He won't be in business long under your flat tax system.
Based on your Flat Tax system, they owe taxes on the sale of 40,000 dollars @25% that would be 10,000 dollars in taxes.
The company the dealer bought the car from for resale must also pay the 25% tax on the sale, so that's another 8.750 dollars.
Trickle down the materials costs to each of the vendors, and the taxes collected on that car could end up being over 500,000 dollars to the government.
But lets look back at the poor dealer who lost 5,000 dollars more than the profits on the car sale.
He won't be in business long under your flat tax system.
Re: Fair Tax Act
You seem to be stuck on the Reagan era idea of Trickle Down Economics. It didn't work for him and it's not helping you understand my theory at all. LOL The taxes, today's system or my wild invention, are not cumulative. They do not compound going up the supply chain. The idea of hidden taxes has been debunked many times by many economists. Each transaction along the chain is complete onto itself. Double taxation truly is not a factor.
I'll try this yet one more time in an automobile context ...
That car the dealer bought for $35,000 is inventory. That is the cost of the item needed to conduct his business. Selling it for $40,000 gave him an income of only $5,000 which is the part of the transaction that would be taxable as income. It's new money the dealer never had prior to selling the car. I don't know where he got the $35,000 to buy the inventory, but that's not relevant as far as the flat tax is concerned. The people who sold the dealer that car for $35,000 are in the same situation. They pay taxes on their income, not on their cost of building the product.
The dealer lost nothing to taxes. He gained $5,000 income on the sale and is liable for only $1,250 in taxes. That leaves him $3.750 to take a nice vacation in Jamaica, or something.
I'll try this yet one more time in an automobile context ...
That car the dealer bought for $35,000 is inventory. That is the cost of the item needed to conduct his business. Selling it for $40,000 gave him an income of only $5,000 which is the part of the transaction that would be taxable as income. It's new money the dealer never had prior to selling the car. I don't know where he got the $35,000 to buy the inventory, but that's not relevant as far as the flat tax is concerned. The people who sold the dealer that car for $35,000 are in the same situation. They pay taxes on their income, not on their cost of building the product.
The dealer lost nothing to taxes. He gained $5,000 income on the sale and is liable for only $1,250 in taxes. That leaves him $3.750 to take a nice vacation in Jamaica, or something.
Re: Fair Tax Act
OK, so then your Flat Tax System will ALLOW for Deductions. That's the way our present tax system works.
Taxes paid out by any company are added back into the selling price of the product. They have to be!
Else everything would sell below the cost to make them, and all businesses would go bankrupt.
Taxes paid out by any company are added back into the selling price of the product. They have to be!
Else everything would sell below the cost to make them, and all businesses would go bankrupt.
Re: Fair Tax Act
Here are the answers to some questions I posed to an artificial intelligence machine.
- The federal government spends an estimated $4.8 trillion each year. This includes spending on defense and non-defense discretionary programs, mandatory spending on entitlement programs such as Social Security and Medicare, and interest payments on the national debt. The federal government also spends money on foreign aid, which amounted to about $45 billion in 2019.
According to the latest data from the Bureau of Economic Analysis, the U.S. Gross Domestic Product (GDP) grew at an annual rate of 4.3% in the fourth quarter of 2020. This is down slightly from the 4.6% growth rate in the third quarter. The GDP for 2020 as a whole was -3.5%, reflecting the economic disruption caused by the COVID-19 pandemic.
The Gross Domestic Product (GDP) of the United States was $21.44 trillion in 2020.
The federal government collects an estimated $1.9 Trillion in individual income taxes each year. This includes income taxes from individuals, corporations, and other businesses. The U.S. also collects an additional $1.1 Trillion in payroll taxes, which are primarily used to fund Social Security and Medicare programs.
According to the latest estimates, there are approximately 30 million businesses and companies operating in the United States. Of these, approximately 6 million are non-employer firms, meaning that they have no paid employees. The remaining 24 million are employer firms, with nearly 5 million of them having fewer than five employees.
According to the Joint Committee on Taxation, approximately 1.5 million businesses and corporations in the United States are not paying any federal income taxes. This includes both large corporations as well as small businesses. The reasons for this vary, but can include taking advantage of tax credits, deductions, and other incentives, as well as having income that is not subject to taxation.
According to the Internal Revenue Service (IRS), there were approximately 153 million individual taxpayers in the United States in 2019. This number includes both those who file taxes and those who are exempt from filing.
It is difficult to say whether a flat tax on income would work without knowing more about the specifics of the tax system and the economic conditions in a particular country. A flat tax could potentially simplify the tax system, but it could also make it more regressive than a progressive system, meaning that it could disproportionately impact lower-income individuals. Additionally, while a flat tax may increase tax revenue initially, it could also lead to decreased economic activity, as individuals may choose to invest less or move their income to other countries with lower rates. Ultimately, the success of a flat tax system would depend on the economic and political environment of the country in question.
Re: Fair Tax Act
To start with Social Security IS NOT an ENTITLEMENT, WE paid into it our entire working lives!
It was more than solvent until the government got their mitts into it!
And again, ALL taxes paid out by businesses of any kind, for any purpose, is added in their cost of goods sold, including the accounting costs for those taxes, so in the end, it is the Individual Consumer who is paying all business taxes for the business.
And sadly, at an inflated rate, often up to seven times the amount the government gets from those taxes.
The Government NEEDS to Quit Wasting Our Money, that would be a big start!
It was more than solvent until the government got their mitts into it!
And again, ALL taxes paid out by businesses of any kind, for any purpose, is added in their cost of goods sold, including the accounting costs for those taxes, so in the end, it is the Individual Consumer who is paying all business taxes for the business.
And sadly, at an inflated rate, often up to seven times the amount the government gets from those taxes.
The Government NEEDS to Quit Wasting Our Money, that would be a big start!
Re: Fair Tax Act
There is waste and inefficiency in every human endeavor. If every business entity paid their fair share of taxes then individuals like you and i would be paying less. It has to do with the number of tax payers. Do the math.The Government NEEDS to Quit Wasting Our Money, that would be a big start!
And, as long as I'm quoting authorities ... https://www.ssa.gov/thirdparty/material ... -10297.pdf
Social Security benefits are not an annuity, but an entitlement program. This means that recipients of Social Security are entitled to receive a certain benefit amount, regardless of their individual circumstances. The entitlement to Social Security benefits is based on the amount of money that a worker has paid into the Social Security system throughout their working life. The more money that is paid in, the higher the benefit amount will be. In addition, certain eligibility criteria must be met in order to receive Social Security benefits, such as age and work history.
Re: Fair Tax Act
You really don't understand business do you?
Where do you think the money comes from for businesses to pay their taxes?
I can guarantee you, it DOES NOT come out of our pockets!
YES we are Entitled to OUR MONEY, but that is NOT what Entitlement means to the government.
Where do you think the money comes from for businesses to pay their taxes?
I can guarantee you, it DOES NOT come out of our pockets!
YES we are Entitled to OUR MONEY, but that is NOT what Entitlement means to the government.
Re: Fair Tax Act
I may not understand business the same way you do, but I do understand math. It's hard to say with certainty at this point but I'm sensing you are not including business entities as tax paying consumers, which they certainly are. At the moment a million and a half of them are not paying taxes.
The people handing out SSA benefits seem to think it's an entitlement. You can argue the terms all you want but that isn't going to change their definition of what they are doing.
The people handing out SSA benefits seem to think it's an entitlement. You can argue the terms all you want but that isn't going to change their definition of what they are doing.
Re: Fair Tax Act
ALL Expenses borne by a business, are included in the cost of goods sold. Then the cost of goods sold is marked up by the percentage their industry normally allows.
This means the taxes they paid out, plus the accounting for those taxes is included in the price they sell their product for.
And since this sales price is marked up slightly at each level of distribution, a small profit is made on the taxes collected.
It doesn't matter if the sale is to the next business in the chain of manufacturing, or the next level of distribution in that chain. Each of these businesses add their costs into the price they sell the product down the chain.
So, the one dollar in taxes paid out by the first company in the chain, is compounded to the point, by the time it reaches the end consumer, that one dollar costs the End Customer 5 to 7 dollars in hidden taxes in the price of the product. Plus if they pay Sales Tax where they live, they are paying Sales Taxes on all those hidden taxes in the sale price.
Then you jump in and say, taxes are only paid on net Income after expenses, which although is a true statement, it is a meaningless statement as far as WHO ends up paying those taxes.
After the First Year In Business, and paying out Income Tax on that first years net income, it becomes an Expense which is included in the Second Years Cost of Goods Sold. The previous years taxes are also a Deduction from the current years Income. But all that extra accounting costs money too, and that is also added into the Cost of Goods sold.
I don't know how to explain it any clearer. My family has been in business our entire lives, and although we complain about the many taxes, and the cost to deal with them, all of those costs end up added to the selling price of our products.
It has to be or you will end up going bankrupt!
The hard part is when some items have reached the price saturation point for the market. Folks just won't pay any higher price on certain products. So the only thing you can do at that point, is move the revenue loss over to another product they will pay more for. And this is how many companies have what are called Loss Leaders, and discounted sale items. Usually these are to get you into the store, but sometimes it is to liquidate a product they will no longer carry, and/or change to a different model/style/or type.
This means the taxes they paid out, plus the accounting for those taxes is included in the price they sell their product for.
And since this sales price is marked up slightly at each level of distribution, a small profit is made on the taxes collected.
It doesn't matter if the sale is to the next business in the chain of manufacturing, or the next level of distribution in that chain. Each of these businesses add their costs into the price they sell the product down the chain.
So, the one dollar in taxes paid out by the first company in the chain, is compounded to the point, by the time it reaches the end consumer, that one dollar costs the End Customer 5 to 7 dollars in hidden taxes in the price of the product. Plus if they pay Sales Tax where they live, they are paying Sales Taxes on all those hidden taxes in the sale price.
Then you jump in and say, taxes are only paid on net Income after expenses, which although is a true statement, it is a meaningless statement as far as WHO ends up paying those taxes.
After the First Year In Business, and paying out Income Tax on that first years net income, it becomes an Expense which is included in the Second Years Cost of Goods Sold. The previous years taxes are also a Deduction from the current years Income. But all that extra accounting costs money too, and that is also added into the Cost of Goods sold.
I don't know how to explain it any clearer. My family has been in business our entire lives, and although we complain about the many taxes, and the cost to deal with them, all of those costs end up added to the selling price of our products.
It has to be or you will end up going bankrupt!
The hard part is when some items have reached the price saturation point for the market. Folks just won't pay any higher price on certain products. So the only thing you can do at that point, is move the revenue loss over to another product they will pay more for. And this is how many companies have what are called Loss Leaders, and discounted sale items. Usually these are to get you into the store, but sometimes it is to liquidate a product they will no longer carry, and/or change to a different model/style/or type.